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Watch Meghan Markle’s jaw drop in SHOCK as she spots fan she used to DM on Instagram in a crowd of thousands
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Civeo Reports Third Quarter 2018 Results and Announces Initial Room Commitments at Sitka Lodge in Kitimat, B.C.
HOUSTON and CALGARY, Alberta, Oct. 31, 2018 (GLOBE NEWSWIRE) -- Civeo Corporation (NYSE:CVEO) today reported financial and operating results for the third quarter ended September 30, 2018 and announced initial room commitments at its Sitka Lodge.
Highlights include:
· Delivered third quarter revenues of $120.5 million, an increase from $97.5 million in 2017
· Generated $11.9 million in operating cash flow and $9.8 million in free cash flow
· Room commitments from the Coastal GasLink Pipeline Project (“CGL”) and LNG Canada’s Engineering, Procurement and Construction firm (“EPC”) at the Sitka Lodge, contingent on Notice To Proceed (“NTP”), which is expected shortly, anticipated to generate approximately C$55 million in total revenues over 2018-2020
· Announced completion of an amendment to its credit facility to, among other things, change certain of the financial covenants to provide greater flexibility and capital availability heading into early 2019 in anticipation of capital spending related to the LNG Canada project
“In the third quarter, we generated solid results from our Australian and U.S. segments. In Australia, steady commodity price fundamentals drove sequential improvement in revenue and Adjusted EBITDA. Our U.S. segment, aided by the geographic reallocation of our wellsite assets and robust drilling and completion activity in the Permian and Mid-Con basins, delivered strong EBITDA in the third quarter. Our Canadian third quarter results were negatively impacted by overlapping turnaround schedules between two customers, reduced operations related room demand from a customer production outage and maintenance-related operational issues. However, we were pleased to win the room commitments for our Sitka Lodge,” stated Bradley J. Dodson, President and Chief Executive Officer.
“Additionally, the Noralta acquisition in Canada continues to drive year-over-year growth in our business. We have completed the integration of Noralta and remain on track to generate C$10 million in annualized synergies by the end of the year. We have also amended our credit facility to provide our business more flexibility to capitalize on growth opportunities in 2019 and 2020.”
Mr. Dodson concluded, “We are confident in the health of our business and believe we will continue to generate free cash flow, provide best in class service for our customers, and create value for all our stakeholders.”
Third Quarter 2018 Results
In the third quarter of 2018, Civeo generated revenues of $120.5 million and reported net loss of $14.3 million, or $0.09 per share, which includes roughly $2 million in fees associated with third party consulting to support strategic projects. During the third quarter of 2018, Civeo produced operating cash flow of $11.9 million, Adjusted EBITDA of $22.4 million and free cash flow of $9.8 million.
(EBITDA is a non-GAAP financial measure that is defined as net income (loss) attributable to Civeo plus interest, taxes, depreciation and amortization, and Adjusted EBITDA is defined as EBITDA adjusted to exclude impairment charges and Noralta transaction costs. Free cash flow is a non-GAAP financial measure that is defined as net cash flows provided by operating activities less capital expenditures plus proceeds from asset sales. Please see the reconciliations to GAAP measures at the end of this news release.)
By comparison, in the third quarter of 2017, Civeo generated revenues of $97.5 million and reported a net loss of $22.3 million, or $0.17 per share. The loss included a $4.4 million pre-tax loss ($2.7 million after-tax, or $0.02 per diluted share) resulting from the impairment of open camp assets and land positions in the Company's Canadian segment. During the third quarter of 2017, Civeo generated operating cash flow of $31.1 million, Adjusted EBITDA of $16.1 million and free cash flow of $29.6 million.
Canadian LNG Award
Civeo is pleased to announce today that it has been awarded an agreement with CGL and LNG Canada’s EPC firm to provide rooms and services from the Company’s existing Sitka accommodations facility, contingent on NTP, which is expected shortly. Civeo’s Sitka Lodge, located in Kitimat, British Columbia, has 646 rooms with plans to expand to 1,100 rooms to support these commitments.
These room commitments at Sitka are in addition to the previously announced four contracts totaling C$100 million of revenues for mobile camps supporting the CGL pipeline project. In accordance with this agreement, CGL will utilize the existing Civeo Sitka Lodge for accommodations required for the construction of the western most portion of the proposed natural gas pipeline, and LNG Canada’s EPC will utilize this lodge for the initial construction phases of the LNG Canada export facility. The awards cover expected room needs over the initial 18 month time period with a minimum room commitment and options for extension of up to 36 months. Expected revenues for these commitments are estimated to be approximately C$55 million over the initial 18 months. Civeo will partner with the local First Nation community at Sitka Lodge to supply the accommodation needs during the term of the agreements.
Mr. Dodson stated “We are delighted to confirm the formalization of the agreement with CGL and LNG Canada’s EPC, further solidifying our position as the partner of choice for workforce accommodation solutions in this region, and we expect to secure more room commitments for Sitka Lodge. In conjunction with our First Nation partners, we look forward to delivering best-in-class accommodations on this exciting LNG project.”
Civeo expects to spend approximately C$15 million in capital to expand the Sitka Lodge to 1,100 rooms, in addition to the previously announced C$10 million of capital related to the four mobile camp contracts supporting the CGL pipeline project.
Business Segment Results
(Unless otherwise noted, the following discussion compares the quarterly results for the third quarter of 2018 to the results for the third quarter of 2017. The Adjusted EBITDA amounts discussed below exclude the fixed asset impairment and Noralta-related expenses noted above.)
Canada
During the third quarter of 2018, the Canadian segment generated revenues of $76.8 million, operating loss of $7.1 million and Adjusted EBITDA of $16.5 million, compared to revenues of $63.8 million, operating loss of $11.7 million and Adjusted EBITDA of $15.6 million for the third quarter of 2017. The third quarter of 2018 results reflect the weakening of the Canadian dollar relative to the U.S. dollar, which decreased revenues by $3.4 million. On a constant currency basis, revenues increased $16.3 million due to the Noralta acquisition, partially offset by the inability to accommodate two turnaround customers simultaneously, as well as the closure of a lodge for maintenance-related operational issues.
Australia
Revenue for the Australian segment was $31.1 million, operating income was $0.5 million and Adjusted EBITDA was $12.4 million in the third quarter of 2018, compared to revenues of $27.5 million, operating loss of $3.7 million and Adjusted EBITDA of $9.7 million in the third quarter of 2017. The third quarter of 2018 results reflect the weakening of the Australian dollar relative to the U.S. dollar, which decreased revenues by $2.5 million and Adjusted EBITDA by $1.0 million. On a constant currency basis, revenues increased $6.0 million due to increased occupancy across a majority of our villages as we continue to see activity strengthen in the mining sector.
U.S.
The U.S. segment generated revenues of $12.6 million, operating loss of $1.3 million and Adjusted EBITDA of $2.4 million in the third quarter of 2018, compared to revenues of $6.1 million, operating loss of $3.9 million and an Adjusted EBITDA loss of $1.9 million in the third quarter of 2017. The revenue increase was primarily due to higher wellsite activity in the Permian and Mid-Con markets and the benefit of the lodge acquisition in Louisiana completed in February 2018.
Income Taxes
Civeo recognized an income tax benefit of $5.3 million, which resulted in an effective tax rate of 28.2% in the third quarter of 2018. During the third quarter of 2017, Civeo recognized an income tax benefit of $4.0 million, which resulted in an effective tax rate of 15.3%.
Financial Condition
As of September 30, 2018, Civeo had total liquidity of approximately $44.4 million, consisting of $39.9 million available under its revolving credit facilities and $4.5 million of cash on hand.
Civeo announced today completion of an amendment to its credit facility to, among other things, change certain of the financial covenants to provide greater flexibility and capital availability heading into early 2019.
Under the amended credit facility, Civeo's leverage ratio (Adjusted EBITDA to total debt) has a maximum of 4.5x in the fourth quarter of 2018 before stepping up to a maximum of 4.75x in the first quarter of 2019. From there, it steps down to 4.5x again in the second quarter of 2019, 4.0x in the third quarter of 2019 and 3.5x in the fourth quarter of 2019 and beyond. Amortization on the term loan facility was also increased from 10% per annum to 12.5% per annum beginning at December 31, 2018 through maturity.
Civeo’s total debt outstanding at September 30, 2018 was $423.1 million, a $7.1 million decrease since June 30, 2018. The decrease resulted largely from repayments of $13.8 million made with cash flow generated by the business, offset by a translation adjustment.
During the third quarter of 2018, Civeo invested $2.7 million in capital expenditures, up from $2.0 million during the third quarter of 2017. Capital expenditures for both periods were primarily for routine maintenance.
Fourth Quarter and Full Year 2018 Guidance
Civeo continues to see less turnaround and pipeline related occupancy in Canada than originally expected. These conditions are likely to persist throughout the fourth quarter of 2018 and into the first quarter of 2019. On the conference call today, Civeo will provide a preliminary outlook of expected results for 2019. For the fourth quarter of 2018, Civeo expects revenues of $113 million to $119 million and EBITDA of $17 million to $20 million. For the full year of 2018, Civeo expects revenues of $466 million to $472 million and EBITDA of $74 million to $77 million. Civeo expects capital expenditures of approximately $15 to $20 million for the full year 2018.
Conference Call
Civeo will host a conference call to discuss its third quarter 2018 financial results today at 11:00 a.m. Eastern time. This call is being webcast and can be accessed at Civeo's website at www.civeo.com Participants may also join the conference call by dialing (800)-239-9838 in the United States or (323)-794-2551 internationally and using the conference ID 6490112 . A replay will be available after the call by dialing (844) 512-2921 in the United States or (412) 317-6671 internationally and using the conference ID 6490112#.
About Civeo
Civeo Corporation is a leading provider of workforce accommodations with prominent market positions in the Canadian oil sands and the Australian natural resource regions. Civeo offers comprehensive solutions for housing hundreds or thousands of workers with its long-term and temporary accommodations and provides catering, facility management, water systems and logistics services. Civeo currently operates a total of 30 lodges and villages in operation in Canada and Australia, with an aggregate of approximately 32,000 rooms. Civeo is publicly traded under the symbol CVEO on the New York Stock Exchange. For more information, please visit Civeo's website at www.civeo.com.
Forward Looking Statements
This news release contains forward-looking statements within the meaning of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are those that do not state historical facts and are, therefore, inherently subject to risks and uncertainties. The forward looking statements in this news release include the statements regarding Civeo’s future plans, priorities and borrowing needs; growth opportunities; optimism about activity, market demand and commodity price environment in 2018; expected benefits of the agreement with CGL and LNG Canada’s EPC and fourth quarter and full year 2018 guidance. The forward-looking statements included herein are based on then current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Such risks and uncertainties include, among other things, risks associated with the general nature of the accommodations industry, risks associated with the level of supply and demand for oil, coal, iron ore and other minerals, including the level of activity and developments in the Canadian oil sands, the level of demand for coal and other natural resources from Australia, and fluctuations in the current and future prices of oil, coal, iron ore and other minerals, risks associated with currency exchange rates, risks associated with the Noralta acquisition, risks associated with the development of new projects, including whether such projects will continue in the future, and other factors discussed in the "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of Civeo’s annual report on Form 10-K for the year ended December 31, 2017 and other reports the Company may file from time to time with the U.S. Securities and Exchange Commission. Each forward-looking statement contained in this news release speaks only as of the date of this release. Except as required by law, Civeo expressly disclaims any intention or obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.- Financial Schedules Follow
*CIVEO CORPORATION*
* UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS*
* (in thousands, except per share amounts)*
*THREE MONTHS ENDED*
* SEPTEMBER 30,* *NINE MONTHS ENDED*
* SEPTEMBER 30,*
*2018* *2017* *2018* *2017*
Revenues $ 120,491 $ 97,489 $ 352,172 $ 280,928
Costs and expenses:
Cost of sales and services 81,753 65,527 247,818 186,683
Selling, general and administrative expenses 17,328 15,871 56,754 44,141
Depreciation and amortization expense 34,468 32,700 99,502 97,083
Impairment expense - 4,360 28,661 4,360
Other operating expense (163 ) 375 348 1,104
133,386 118,833 433,083 333,371
Operating loss (12,895 ) (21,344 ) (80,911 ) (52,443 )
Interest expense, net of capitalized interest (6,404 ) (5,441 ) (19,329 ) (15,697 )
Loss on extinguishment of debt - - (748 ) (842 )
Interest income 16 49 92 69
Other income 412 517 2,923 1,247
Loss before income taxes (18,871 ) (26,219 ) (97,973 ) (67,666 )
Income tax benefit 5,330 4,011 29,386 9,875
Net loss (13,541 ) (22,208 ) (68,587 ) (57,791 )
Less: Net income attributable to noncontrolling interest 97 123 341 343
Net loss attributable to Civeo Corporation (13,638 ) (22,331 ) (68,928 ) (58,134 )
Less: Dividends attributable to Class A preferred shares 612 - 49,100 -
Net loss attributable to Civeo Corporation common shareholders $ (14,250 ) $ (22,331 ) $ (118,028 ) $ (58,134 )
Net loss per share attributable to Civeo Corporation common shareholders:
Basic $ (0.09 ) $ (0.17 ) $ (0.76 ) $ (0.46 )
Diluted $ (0.09 ) $ (0.17 ) $ (0.76 ) $ (0.46 )
Weighted average number of common shares outstanding:
Basic 165,855 130,889 154,411 127,512
Diluted 165,855 130,889 154,411 127,512
*CIVEO CORPORATION*
* CONDENSED CONSOLIDATED BALANCE SHEETS
*
*(in thousands)*
*SEPTEMBER 30,*
* **2018* *DECEMBER 31,*
* **2017*
*(UNAUDITED)*
Current assets:
Cash and cash equivalents $ 4,540 $ 32,647
Accounts receivable, net 85,238 66,823
Inventories 6,543 7,246
Assets held for sale 12,318 9,462
Prepaid expenses and other current assets 29,603 16,034
Total current assets 138,242 132,212
Property, plant and equipment, net 708,455 693,833
Goodwill, net 119,444 -
Other intangible assets, net 130,497 22,753
Other noncurrent assets 1,998 5,114
Total assets $ 1,098,636 $ 853,912
Current liabilities:
Accounts payable $ 32,787 $ 27,812
Accrued liabilities 20,057 22,208
Income taxes 513 1,728
Current portion of long-term debt 28,146 16,596
Deferred revenue 4,415 5,442
Other current liabilities 4,406 1,843
Total current liabilities 90,324 75,629
Long-term debt 392,161 277,990
Deferred income taxes 22,875 -
Other noncurrent liabilities 30,035 23,926
Total liabilities 535,395 377,545
Shareholders' equity:
Preferred shares 55,791 -
Common shares - -
Additional paid-in capital 1,558,901 1,383,934
Accumulated deficit (696,747 ) (579,113 )
Treasury stock (990 ) (358 )
Accumulated other comprehensive loss (353,812 ) (328,213 )
Total Civeo Corporation shareholders' equity 563,143 476,250
Noncontrolling interest 98 117
Total shareholders' equity 563,241 476,367
Total liabilities and shareholders' equity $ 1,098,636 $ 853,912
*CIVEO CORPORATION*
* UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS*
*(in thousands)*
*NINE MONTHS ENDED*
* SEPTEMBER 30,*
*2018* *2017*
Cash flows from operating activities:
Net loss $ (68,587 ) $ (57,791 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 99,502 97,083
Impairment charges 28,661 4,360
Loss on extinguishment of debt 748 842
Deferred income tax benefit (29,272 ) (11,026 )
Non-cash compensation charge 7,804 5,481
Gains on disposals of assets (2,714 ) (1,193 )
Provision (benefit) for loss on receivables, net of recoveries (106 ) 8
Other, net 3,959 3,307
Changes in operating assets and liabilities:
Accounts receivable 89 (2,845 )
Inventories 1,342 (1,507 )
Accounts payable and accrued liabilities (10,787 ) 5,910
Taxes payable 939 9,928
Other current assets and liabilities, net (5,716 ) (7,032 )
Net cash flows provided by operating activities 25,862 45,525
Cash flows from investing activities:
Payments related to acquisitions, net of cash acquired (181,589 ) -
Capital expenditures, including capitalized interest (8,666 ) (8,020 )
Proceeds from disposition of property, plant and equipment 4,038 1,625
Other, net 111 548
Net cash flows used in investing activities (186,106 ) (5,847 )
Cash flows from financing activities:
Proceeds from issuance of common stock - 64,817
Term loan repayments (18,177 ) (12,214 )
Revolving credit borrowings (repayments), net 155,410 (39,937 )
Debt issuance costs (2,742 ) (1,795 )
Other (632 ) (293 )
Net cash flows provided by financing activities 133,859 10,578
Effect of exchange rate changes on cash (1,722 ) 1,961
Net change in cash and cash equivalents (28,107 ) 52,217
Cash and cash equivalents, beginning of period 32,647 1,785
Cash and cash equivalents, end of period $ 4,540 $ 54,002
*CIVEO CORPORATION*
* SEGMENT DATA*
* (in thousands)*
* (unaudited)*
*THREE MONTHS ENDED*
* SEPTEMBER 30,* *NINE MONTHS ENDED*
* SEPTEMBER 30,*
*2018* *2017* *2018* *2017*
Revenues
Canada $ 76,753 $ 63,832 $ 226,661 $ 182,006
Australia 31,090 27,541 89,542 83,164
United States 12,648 6,116 35,969 15,758
Total revenues $ 120,491 $ 97,489 $ 352,172 $ 280,928
EBITDA (1)
Canada $ 16,094 $ 11,201 $ 13,092 $ 39,099
Australia 12,426 9,673 33,062 31,104
United States 2,414 (1,933 ) 3,658 (4,278 )
Corporate and eliminations (9,046 ) (7,191 ) (28,639 ) (20,381 )
Total EBITDA $ 21,888 $ 11,750 $ 21,173 $ 45,544
Adjusted EBITDA (1)
Canada $ 16,494 $ 15,561 $ 44,068 $ 43,459
Australia 12,426 9,673 33,062 31,104
United States 2,414 (1,933 ) 3,658 (4,278 )
Corporate and eliminations (8,982 ) (7,191 ) (23,913 ) (20,381 )
Total adjusted EBITDA $ 22,352 $ 16,110 $ 56,875 $ 49,904
Operating income (loss)
Canada $ (7,129 ) $ (11,691 ) $ (53,777 ) $ (26,283 )
Australia 472 (3,667 ) (3,793 ) (8,284 )
United States (1,349 ) (3,941 ) (6,445 ) (10,347 )
Corporate and eliminations (4,889 ) (2,045 ) (16,896 ) (7,529 )
Total operating loss $ (12,895 ) $ (21,344 ) $ (80,911 ) $ (52,443 )
(1) Please see Non-GAAP Reconciliation Schedule.
*CIVEO CORPORATION*
* NON-GAAP RECONCILIATIONS*
* (in thousands)*
* (unaudited)*
*THREE MONTHS ENDED*
* SEPTEMBER 30,* *NINE MONTHS ENDED*
* SEPTEMBER 30,*
*2018* *2017* *2018* *2017*
EBITDA (1) $ 21,888 $ 11,750 $ 21,173 $ 45,544
Adjusted EBITDA (1) $ 22,352 $ 16,110 $ 56,875 $ 49,904
Free Cash Flow (2) $ 9,762 $ 29,606 $ 21,234 $ 39,130
(1) The term EBITDA is defined as net income (loss) attributable to Civeo Corporation plus interest, taxes, depreciation and amortization. The term Adjusted EBITDA is defined as EBITDA adjusted to exclude impairment charges and certain costs associated with Civeo's acquisition of Noralta. EBITDA and Adjusted EBITDA are not measures of financial performance under generally accepted accounting principles and should not be considered in isolation from or as a substitute for net income or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. Additionally, EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Civeo has included EBITDA and Adjusted EBITDA as supplemental disclosures because its management believes that EBITDA and Adjusted EBITDA provide useful information regarding its ability to service debt and to fund capital expenditures and provide investors a helpful measure for comparing the Civeo's operating performance with the performance of other companies that have different financing and capital structures or tax rates. Civeo uses EBITDA and Adjusted EBITDA to compare and to monitor the performance of its business segments to other comparable public companies and as a benchmark for the award of incentive compensation under its annual incentive compensation plan.
The following table sets forth a reconciliation of EBITDA and Adjusted EBITDA to net loss attributable to Civeo Corporation, which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles (in thousands) (unaudited):
*THREE MONTHS ENDED*
* SEPTEMBER 30,* *NINE MONTHS ENDED*
* SEPTEMBER 30,*
*2018* *2017* *2018* *2017*
Net income (loss) attributable to Civeo Corporation $ (13,638 ) $ (22,331 ) $ (68,928 ) $ (58,134 )
Income tax provision (benefit) (5,330 ) (4,011 ) (29,386 ) (9,875 )
Depreciation and amortization 34,468 32,700 99,502 97,083
Interest income (16 ) (49 ) (92 ) (69 )
Loss on extinguishment of debt - - 748 842
Interest expense 6,404 5,441 19,329 15,697
EBITDA $ 21,888 $ 11,750 $ 21,173 $ 45,544
Adjustments to EBITDA
Impairment expense (a) - 4,360 28,661 4,360
Noralta transaction costs (b) 464 - 7,041 -
Adjusted EBITDA $ 22,352 $ 16,110 $ 56,875 $ 49,904
(a) Relates to the first quarter 2018 and third quarter 2017 impairment of assets in Canada. During the first quarter 2018, we recorded a pre-tax loss of $28.7 million ($20.9 million after-tax, or $0.14 per diluted share), which is included in Impairment expense on the unaudited statements of operations. During the third quarter 2017, we recorded a pre-tax loss of $4.4 million ($3.2 million after-tax, or $0.02 per diluted share), which is included in Impairment expense on the unaudited statements of operations.
(b) Relates to costs incurred associated with Civeo's acquisition of Noralta Lodge Ltd. For the nine month period ended September 30, 2018, the $7.0 million of costs in 2018 ($6.3 million after-tax, or $0.04, per diluted share), are reflected in the Canada ($2.3 million) and Corporate and eliminations ($4.7 million) reportable segments and are included in Costs of sales and services ($0.3 million) and Selling, general and administrative expenses ($6.7 million) on the unaudited statements of operations. For the three month period ended September 30, 2018, the $0.5 million of costs in 2018 ($0.4 million after-tax, or $0.00, per diluted share), are reflected in the Canada ($0.4 million) and Corporate and eliminations ($0.1 million) reportable segments and are included in Costs of sales and services ($0.2 million) and Selling, general and administrative expenses ($0.3 million) on the unaudited statements of operations.
(2) The term Free Cash Flow is defined as net cash flows provided by operating activities less capital expenditures plus proceeds from asset sales. Free Cash Flow is not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation from or as a substitute for cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. Additionally, Free Cash Flow may not be comparable to other similarly titled measures of other companies. Civeo has included Free Cash Flow as a supplemental disclosure because its management believes that Free Cash Flow provides useful information regarding the cash flow generating ability of its business relative to its capital expenditure and debt service obligations. Civeo uses Free Cash Flow to compare and to understand, manage, make operating decisions and evaluate Civeo's business. It is also used as a benchmark for the award of incentive compensation under its Free Cash Flow plan.
The following table sets forth a reconciliation of Free Cash Flow to Net Cash Flows Provided by Operating Activities, which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles (in thousands) (unaudited):
*THREE MONTHS ENDED*
* SEPTEMBER 30,* *NINE MONTHS ENDED*
* SEPTEMBER 30,*
*2018* *2017* *2018* *2017*
Net Cash Flows Provided by Operating Activities $ 11,885 $ 31,124 $ 25,862 $ 45,525
Capital expenditures, including capitalized interest (2,723 ) (1,983 ) (8,666 ) (8,020 )
Proceeds from disposition of property, plant and equipment 600 465 4,038 1,625
Free Cash Flow $ 9,762 $ 29,606 $ 21,234 $ 39,130
*CIVEO CORPORATION*
* NON-GAAP RECONCILIATIONS - GUIDANCE*
* (in millions)*
* (unaudited)*
*THREE MONTHS ENDING
DECEMBER 31, 2018* *YEAR ENDING *
* DECEMBER 31, 2018*
EBITDA Range (1) $ 17.0 $ 20.0 $ 38.3 $ 41.3
Adjusted EBITDA Range (1) $ 17.0 $ 20.0 $ 74.0 $ 77.0
(1) The following table sets forth a reconciliation of estimated EBITDA and Adjusted EBITDA to estimated net loss, which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles (in millions) (unaudited):
*THREE MONTHS ENDING
DECEMBER 31, 2018* *YEAR ENDING *
* DECEMBER 31, 2018*
*(estimated)* *(estimated)*
Net loss $ (20.5 ) $ (18.5 ) $ (89.3 ) $ (87.3 )
Income tax provision (benefit) (3.0 ) (2.0 ) (32.4 ) (31.4 )
Depreciation and amortization 34.5 34.5 134.0 134.0
Interest expense 6.0 6.0 26.0 26.0
EBITDA $ 17.0 $ 20.0 $ 38.3 $ 41.3
Adjustments to EBITDA
Impairment expense (a) - - 28.7 28.7
Noralta transaction costs (b) - - 7.0 7.0
Adjusted EBITDA $ 17.0 $ 20.0 $ 74.0 $ 77.0
(a) Relates to the first quarter 2018 impairment of assets in Canada. During the first quarter 2018, we recorded a pre-tax loss of $28.7 million ($20.9 million after-tax, or $0.14 per diluted share), which is included in Impairment expense on the unaudited statements of operations.
(b) Relates to costs incurred associated with Civeo's acquisition of Noralta Lodge Ltd. For the nine month period ended September 30, 2018, the $7.0 million of costs in 2018 ($6.3 million after-tax, or $0.04, per diluted share), are reflected in the Canada ($2.3 million) and Corporate and eliminations ($4.7 million) reportable segments and are included in Costs of sales and services ($0.3 million) and Selling, general and administrative expenses ($6.7 million) on the unaudited statements of operations.
*CIVEO CORPORATION*
* SUPPLEMENTAL QUARTERLY SEGMENT AND OPERATING DATA*
* (U.S. dollars in thousands, except for room counts and average daily rates)*
* (unaudited)*
*THREE MONTHS ENDED*
* SEPTEMBER 30,* *NINE MONTHS ENDED*
* SEPTEMBER 30,*
*2018* *2017* *2018* *2017*
*Supplemental Operating Data - Canadian Segment*
Revenues
Accommodation revenue (1) $ 72,991 $ 60,018 $ 204,258 $ 169,891
Mobile facility rental revenue (2) 135 579 9,283 1,380
Catering and other services revenue (3) 3,627 3,037 11,082 9,121
Manufacturing revenue (4) - 198 2,038 1,614
Total Canadian revenues $ 76,753 $ 63,832 $ 226,661 $ 182,006
Average available lodge rooms (5) 22,707 14,720 19,975 14,720
Rentable rooms (6) 13,406 8,698 12,362 8,564
Average daily rates (7) $ 89 $ 92 $ 88 $ 93
Billed rooms (8) 816,295 646,642 2,320,012 1,822,617
Occupancy in lodges (9) 66 % 81 % 69 % 78 %
Canadian dollar to U.S. dollar $ 0.765 $ 0.799 $ 0.777 $ 0.766
*Supplemental Operating Data - Australian Segment*
Accommodation revenue (1) $ 30,679 $ 27,541 $ 88,343 $ 83,164
Catering and other services revenue (3) 411 - 1,199 -
Total Australian revenues $ 31,090 $ 27,541 $ 89,542 $ 83,164
Average available village rooms (5) 9,346 9,359 9,346 9,377
Rentable rooms (6) 8,739 8,725 8,731 8,753
Average daily rates (7) $ 77 $ 81 $ 79 $ 81
Billed rooms (8) 396,747 340,467 1,114,695 1,030,068
Occupancy in villages (9) 49 % 42 % 47 % 43 %
Australian dollar to U.S. dollar $ 0.731 $ 0.790 $ 0.758 $ 0.766
(1) Includes revenues related to lodge, village and open camp rooms.
(2) Includes revenues related to mobile camps.
(3) Includes revenues related to catering and food services, laundry and water and wastewater treatment services.
(4) Includes revenues related to modular construction and manufacturing services.
(5) Average available rooms relate to Canadian lodges and Australian villages and includes rooms that are utilized for our personnel.
(6) Rentable rooms relate to Canadian lodges and Australian villages and excludes rooms that are utilized for our personnel and out-of-service rooms.
(7) Average daily rate is based on rentable rooms and lodge/village revenue.
(8) Billed rooms represents total billed days.
(9) Occupancy represents total billed days divided by rentable days. Rentable days excludes staff rooms and out-of-service rooms.
Reported by GlobeNewswire 1 hour ago.
Highlights include:
· Delivered third quarter revenues of $120.5 million, an increase from $97.5 million in 2017
· Generated $11.9 million in operating cash flow and $9.8 million in free cash flow
· Room commitments from the Coastal GasLink Pipeline Project (“CGL”) and LNG Canada’s Engineering, Procurement and Construction firm (“EPC”) at the Sitka Lodge, contingent on Notice To Proceed (“NTP”), which is expected shortly, anticipated to generate approximately C$55 million in total revenues over 2018-2020
· Announced completion of an amendment to its credit facility to, among other things, change certain of the financial covenants to provide greater flexibility and capital availability heading into early 2019 in anticipation of capital spending related to the LNG Canada project
“In the third quarter, we generated solid results from our Australian and U.S. segments. In Australia, steady commodity price fundamentals drove sequential improvement in revenue and Adjusted EBITDA. Our U.S. segment, aided by the geographic reallocation of our wellsite assets and robust drilling and completion activity in the Permian and Mid-Con basins, delivered strong EBITDA in the third quarter. Our Canadian third quarter results were negatively impacted by overlapping turnaround schedules between two customers, reduced operations related room demand from a customer production outage and maintenance-related operational issues. However, we were pleased to win the room commitments for our Sitka Lodge,” stated Bradley J. Dodson, President and Chief Executive Officer.
“Additionally, the Noralta acquisition in Canada continues to drive year-over-year growth in our business. We have completed the integration of Noralta and remain on track to generate C$10 million in annualized synergies by the end of the year. We have also amended our credit facility to provide our business more flexibility to capitalize on growth opportunities in 2019 and 2020.”
Mr. Dodson concluded, “We are confident in the health of our business and believe we will continue to generate free cash flow, provide best in class service for our customers, and create value for all our stakeholders.”
Third Quarter 2018 Results
In the third quarter of 2018, Civeo generated revenues of $120.5 million and reported net loss of $14.3 million, or $0.09 per share, which includes roughly $2 million in fees associated with third party consulting to support strategic projects. During the third quarter of 2018, Civeo produced operating cash flow of $11.9 million, Adjusted EBITDA of $22.4 million and free cash flow of $9.8 million.
(EBITDA is a non-GAAP financial measure that is defined as net income (loss) attributable to Civeo plus interest, taxes, depreciation and amortization, and Adjusted EBITDA is defined as EBITDA adjusted to exclude impairment charges and Noralta transaction costs. Free cash flow is a non-GAAP financial measure that is defined as net cash flows provided by operating activities less capital expenditures plus proceeds from asset sales. Please see the reconciliations to GAAP measures at the end of this news release.)
By comparison, in the third quarter of 2017, Civeo generated revenues of $97.5 million and reported a net loss of $22.3 million, or $0.17 per share. The loss included a $4.4 million pre-tax loss ($2.7 million after-tax, or $0.02 per diluted share) resulting from the impairment of open camp assets and land positions in the Company's Canadian segment. During the third quarter of 2017, Civeo generated operating cash flow of $31.1 million, Adjusted EBITDA of $16.1 million and free cash flow of $29.6 million.
Canadian LNG Award
Civeo is pleased to announce today that it has been awarded an agreement with CGL and LNG Canada’s EPC firm to provide rooms and services from the Company’s existing Sitka accommodations facility, contingent on NTP, which is expected shortly. Civeo’s Sitka Lodge, located in Kitimat, British Columbia, has 646 rooms with plans to expand to 1,100 rooms to support these commitments.
These room commitments at Sitka are in addition to the previously announced four contracts totaling C$100 million of revenues for mobile camps supporting the CGL pipeline project. In accordance with this agreement, CGL will utilize the existing Civeo Sitka Lodge for accommodations required for the construction of the western most portion of the proposed natural gas pipeline, and LNG Canada’s EPC will utilize this lodge for the initial construction phases of the LNG Canada export facility. The awards cover expected room needs over the initial 18 month time period with a minimum room commitment and options for extension of up to 36 months. Expected revenues for these commitments are estimated to be approximately C$55 million over the initial 18 months. Civeo will partner with the local First Nation community at Sitka Lodge to supply the accommodation needs during the term of the agreements.
Mr. Dodson stated “We are delighted to confirm the formalization of the agreement with CGL and LNG Canada’s EPC, further solidifying our position as the partner of choice for workforce accommodation solutions in this region, and we expect to secure more room commitments for Sitka Lodge. In conjunction with our First Nation partners, we look forward to delivering best-in-class accommodations on this exciting LNG project.”
Civeo expects to spend approximately C$15 million in capital to expand the Sitka Lodge to 1,100 rooms, in addition to the previously announced C$10 million of capital related to the four mobile camp contracts supporting the CGL pipeline project.
Business Segment Results
(Unless otherwise noted, the following discussion compares the quarterly results for the third quarter of 2018 to the results for the third quarter of 2017. The Adjusted EBITDA amounts discussed below exclude the fixed asset impairment and Noralta-related expenses noted above.)
Canada
During the third quarter of 2018, the Canadian segment generated revenues of $76.8 million, operating loss of $7.1 million and Adjusted EBITDA of $16.5 million, compared to revenues of $63.8 million, operating loss of $11.7 million and Adjusted EBITDA of $15.6 million for the third quarter of 2017. The third quarter of 2018 results reflect the weakening of the Canadian dollar relative to the U.S. dollar, which decreased revenues by $3.4 million. On a constant currency basis, revenues increased $16.3 million due to the Noralta acquisition, partially offset by the inability to accommodate two turnaround customers simultaneously, as well as the closure of a lodge for maintenance-related operational issues.
Australia
Revenue for the Australian segment was $31.1 million, operating income was $0.5 million and Adjusted EBITDA was $12.4 million in the third quarter of 2018, compared to revenues of $27.5 million, operating loss of $3.7 million and Adjusted EBITDA of $9.7 million in the third quarter of 2017. The third quarter of 2018 results reflect the weakening of the Australian dollar relative to the U.S. dollar, which decreased revenues by $2.5 million and Adjusted EBITDA by $1.0 million. On a constant currency basis, revenues increased $6.0 million due to increased occupancy across a majority of our villages as we continue to see activity strengthen in the mining sector.
U.S.
The U.S. segment generated revenues of $12.6 million, operating loss of $1.3 million and Adjusted EBITDA of $2.4 million in the third quarter of 2018, compared to revenues of $6.1 million, operating loss of $3.9 million and an Adjusted EBITDA loss of $1.9 million in the third quarter of 2017. The revenue increase was primarily due to higher wellsite activity in the Permian and Mid-Con markets and the benefit of the lodge acquisition in Louisiana completed in February 2018.
Income Taxes
Civeo recognized an income tax benefit of $5.3 million, which resulted in an effective tax rate of 28.2% in the third quarter of 2018. During the third quarter of 2017, Civeo recognized an income tax benefit of $4.0 million, which resulted in an effective tax rate of 15.3%.
Financial Condition
As of September 30, 2018, Civeo had total liquidity of approximately $44.4 million, consisting of $39.9 million available under its revolving credit facilities and $4.5 million of cash on hand.
Civeo announced today completion of an amendment to its credit facility to, among other things, change certain of the financial covenants to provide greater flexibility and capital availability heading into early 2019.
Under the amended credit facility, Civeo's leverage ratio (Adjusted EBITDA to total debt) has a maximum of 4.5x in the fourth quarter of 2018 before stepping up to a maximum of 4.75x in the first quarter of 2019. From there, it steps down to 4.5x again in the second quarter of 2019, 4.0x in the third quarter of 2019 and 3.5x in the fourth quarter of 2019 and beyond. Amortization on the term loan facility was also increased from 10% per annum to 12.5% per annum beginning at December 31, 2018 through maturity.
Civeo’s total debt outstanding at September 30, 2018 was $423.1 million, a $7.1 million decrease since June 30, 2018. The decrease resulted largely from repayments of $13.8 million made with cash flow generated by the business, offset by a translation adjustment.
During the third quarter of 2018, Civeo invested $2.7 million in capital expenditures, up from $2.0 million during the third quarter of 2017. Capital expenditures for both periods were primarily for routine maintenance.
Fourth Quarter and Full Year 2018 Guidance
Civeo continues to see less turnaround and pipeline related occupancy in Canada than originally expected. These conditions are likely to persist throughout the fourth quarter of 2018 and into the first quarter of 2019. On the conference call today, Civeo will provide a preliminary outlook of expected results for 2019. For the fourth quarter of 2018, Civeo expects revenues of $113 million to $119 million and EBITDA of $17 million to $20 million. For the full year of 2018, Civeo expects revenues of $466 million to $472 million and EBITDA of $74 million to $77 million. Civeo expects capital expenditures of approximately $15 to $20 million for the full year 2018.
Conference Call
Civeo will host a conference call to discuss its third quarter 2018 financial results today at 11:00 a.m. Eastern time. This call is being webcast and can be accessed at Civeo's website at www.civeo.com Participants may also join the conference call by dialing (800)-239-9838 in the United States or (323)-794-2551 internationally and using the conference ID 6490112 . A replay will be available after the call by dialing (844) 512-2921 in the United States or (412) 317-6671 internationally and using the conference ID 6490112#.
About Civeo
Civeo Corporation is a leading provider of workforce accommodations with prominent market positions in the Canadian oil sands and the Australian natural resource regions. Civeo offers comprehensive solutions for housing hundreds or thousands of workers with its long-term and temporary accommodations and provides catering, facility management, water systems and logistics services. Civeo currently operates a total of 30 lodges and villages in operation in Canada and Australia, with an aggregate of approximately 32,000 rooms. Civeo is publicly traded under the symbol CVEO on the New York Stock Exchange. For more information, please visit Civeo's website at www.civeo.com.
Forward Looking Statements
This news release contains forward-looking statements within the meaning of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are those that do not state historical facts and are, therefore, inherently subject to risks and uncertainties. The forward looking statements in this news release include the statements regarding Civeo’s future plans, priorities and borrowing needs; growth opportunities; optimism about activity, market demand and commodity price environment in 2018; expected benefits of the agreement with CGL and LNG Canada’s EPC and fourth quarter and full year 2018 guidance. The forward-looking statements included herein are based on then current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Such risks and uncertainties include, among other things, risks associated with the general nature of the accommodations industry, risks associated with the level of supply and demand for oil, coal, iron ore and other minerals, including the level of activity and developments in the Canadian oil sands, the level of demand for coal and other natural resources from Australia, and fluctuations in the current and future prices of oil, coal, iron ore and other minerals, risks associated with currency exchange rates, risks associated with the Noralta acquisition, risks associated with the development of new projects, including whether such projects will continue in the future, and other factors discussed in the "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of Civeo’s annual report on Form 10-K for the year ended December 31, 2017 and other reports the Company may file from time to time with the U.S. Securities and Exchange Commission. Each forward-looking statement contained in this news release speaks only as of the date of this release. Except as required by law, Civeo expressly disclaims any intention or obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.- Financial Schedules Follow
*CIVEO CORPORATION*
* UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS*
* (in thousands, except per share amounts)*
*THREE MONTHS ENDED*
* SEPTEMBER 30,* *NINE MONTHS ENDED*
* SEPTEMBER 30,*
*2018* *2017* *2018* *2017*
Revenues $ 120,491 $ 97,489 $ 352,172 $ 280,928
Costs and expenses:
Cost of sales and services 81,753 65,527 247,818 186,683
Selling, general and administrative expenses 17,328 15,871 56,754 44,141
Depreciation and amortization expense 34,468 32,700 99,502 97,083
Impairment expense - 4,360 28,661 4,360
Other operating expense (163 ) 375 348 1,104
133,386 118,833 433,083 333,371
Operating loss (12,895 ) (21,344 ) (80,911 ) (52,443 )
Interest expense, net of capitalized interest (6,404 ) (5,441 ) (19,329 ) (15,697 )
Loss on extinguishment of debt - - (748 ) (842 )
Interest income 16 49 92 69
Other income 412 517 2,923 1,247
Loss before income taxes (18,871 ) (26,219 ) (97,973 ) (67,666 )
Income tax benefit 5,330 4,011 29,386 9,875
Net loss (13,541 ) (22,208 ) (68,587 ) (57,791 )
Less: Net income attributable to noncontrolling interest 97 123 341 343
Net loss attributable to Civeo Corporation (13,638 ) (22,331 ) (68,928 ) (58,134 )
Less: Dividends attributable to Class A preferred shares 612 - 49,100 -
Net loss attributable to Civeo Corporation common shareholders $ (14,250 ) $ (22,331 ) $ (118,028 ) $ (58,134 )
Net loss per share attributable to Civeo Corporation common shareholders:
Basic $ (0.09 ) $ (0.17 ) $ (0.76 ) $ (0.46 )
Diluted $ (0.09 ) $ (0.17 ) $ (0.76 ) $ (0.46 )
Weighted average number of common shares outstanding:
Basic 165,855 130,889 154,411 127,512
Diluted 165,855 130,889 154,411 127,512
*CIVEO CORPORATION*
* CONDENSED CONSOLIDATED BALANCE SHEETS
*
*(in thousands)*
*SEPTEMBER 30,*
* **2018* *DECEMBER 31,*
* **2017*
*(UNAUDITED)*
Current assets:
Cash and cash equivalents $ 4,540 $ 32,647
Accounts receivable, net 85,238 66,823
Inventories 6,543 7,246
Assets held for sale 12,318 9,462
Prepaid expenses and other current assets 29,603 16,034
Total current assets 138,242 132,212
Property, plant and equipment, net 708,455 693,833
Goodwill, net 119,444 -
Other intangible assets, net 130,497 22,753
Other noncurrent assets 1,998 5,114
Total assets $ 1,098,636 $ 853,912
Current liabilities:
Accounts payable $ 32,787 $ 27,812
Accrued liabilities 20,057 22,208
Income taxes 513 1,728
Current portion of long-term debt 28,146 16,596
Deferred revenue 4,415 5,442
Other current liabilities 4,406 1,843
Total current liabilities 90,324 75,629
Long-term debt 392,161 277,990
Deferred income taxes 22,875 -
Other noncurrent liabilities 30,035 23,926
Total liabilities 535,395 377,545
Shareholders' equity:
Preferred shares 55,791 -
Common shares - -
Additional paid-in capital 1,558,901 1,383,934
Accumulated deficit (696,747 ) (579,113 )
Treasury stock (990 ) (358 )
Accumulated other comprehensive loss (353,812 ) (328,213 )
Total Civeo Corporation shareholders' equity 563,143 476,250
Noncontrolling interest 98 117
Total shareholders' equity 563,241 476,367
Total liabilities and shareholders' equity $ 1,098,636 $ 853,912
*CIVEO CORPORATION*
* UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS*
*(in thousands)*
*NINE MONTHS ENDED*
* SEPTEMBER 30,*
*2018* *2017*
Cash flows from operating activities:
Net loss $ (68,587 ) $ (57,791 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 99,502 97,083
Impairment charges 28,661 4,360
Loss on extinguishment of debt 748 842
Deferred income tax benefit (29,272 ) (11,026 )
Non-cash compensation charge 7,804 5,481
Gains on disposals of assets (2,714 ) (1,193 )
Provision (benefit) for loss on receivables, net of recoveries (106 ) 8
Other, net 3,959 3,307
Changes in operating assets and liabilities:
Accounts receivable 89 (2,845 )
Inventories 1,342 (1,507 )
Accounts payable and accrued liabilities (10,787 ) 5,910
Taxes payable 939 9,928
Other current assets and liabilities, net (5,716 ) (7,032 )
Net cash flows provided by operating activities 25,862 45,525
Cash flows from investing activities:
Payments related to acquisitions, net of cash acquired (181,589 ) -
Capital expenditures, including capitalized interest (8,666 ) (8,020 )
Proceeds from disposition of property, plant and equipment 4,038 1,625
Other, net 111 548
Net cash flows used in investing activities (186,106 ) (5,847 )
Cash flows from financing activities:
Proceeds from issuance of common stock - 64,817
Term loan repayments (18,177 ) (12,214 )
Revolving credit borrowings (repayments), net 155,410 (39,937 )
Debt issuance costs (2,742 ) (1,795 )
Other (632 ) (293 )
Net cash flows provided by financing activities 133,859 10,578
Effect of exchange rate changes on cash (1,722 ) 1,961
Net change in cash and cash equivalents (28,107 ) 52,217
Cash and cash equivalents, beginning of period 32,647 1,785
Cash and cash equivalents, end of period $ 4,540 $ 54,002
*CIVEO CORPORATION*
* SEGMENT DATA*
* (in thousands)*
* (unaudited)*
*THREE MONTHS ENDED*
* SEPTEMBER 30,* *NINE MONTHS ENDED*
* SEPTEMBER 30,*
*2018* *2017* *2018* *2017*
Revenues
Canada $ 76,753 $ 63,832 $ 226,661 $ 182,006
Australia 31,090 27,541 89,542 83,164
United States 12,648 6,116 35,969 15,758
Total revenues $ 120,491 $ 97,489 $ 352,172 $ 280,928
EBITDA (1)
Canada $ 16,094 $ 11,201 $ 13,092 $ 39,099
Australia 12,426 9,673 33,062 31,104
United States 2,414 (1,933 ) 3,658 (4,278 )
Corporate and eliminations (9,046 ) (7,191 ) (28,639 ) (20,381 )
Total EBITDA $ 21,888 $ 11,750 $ 21,173 $ 45,544
Adjusted EBITDA (1)
Canada $ 16,494 $ 15,561 $ 44,068 $ 43,459
Australia 12,426 9,673 33,062 31,104
United States 2,414 (1,933 ) 3,658 (4,278 )
Corporate and eliminations (8,982 ) (7,191 ) (23,913 ) (20,381 )
Total adjusted EBITDA $ 22,352 $ 16,110 $ 56,875 $ 49,904
Operating income (loss)
Canada $ (7,129 ) $ (11,691 ) $ (53,777 ) $ (26,283 )
Australia 472 (3,667 ) (3,793 ) (8,284 )
United States (1,349 ) (3,941 ) (6,445 ) (10,347 )
Corporate and eliminations (4,889 ) (2,045 ) (16,896 ) (7,529 )
Total operating loss $ (12,895 ) $ (21,344 ) $ (80,911 ) $ (52,443 )
(1) Please see Non-GAAP Reconciliation Schedule.
*CIVEO CORPORATION*
* NON-GAAP RECONCILIATIONS*
* (in thousands)*
* (unaudited)*
*THREE MONTHS ENDED*
* SEPTEMBER 30,* *NINE MONTHS ENDED*
* SEPTEMBER 30,*
*2018* *2017* *2018* *2017*
EBITDA (1) $ 21,888 $ 11,750 $ 21,173 $ 45,544
Adjusted EBITDA (1) $ 22,352 $ 16,110 $ 56,875 $ 49,904
Free Cash Flow (2) $ 9,762 $ 29,606 $ 21,234 $ 39,130
(1) The term EBITDA is defined as net income (loss) attributable to Civeo Corporation plus interest, taxes, depreciation and amortization. The term Adjusted EBITDA is defined as EBITDA adjusted to exclude impairment charges and certain costs associated with Civeo's acquisition of Noralta. EBITDA and Adjusted EBITDA are not measures of financial performance under generally accepted accounting principles and should not be considered in isolation from or as a substitute for net income or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. Additionally, EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Civeo has included EBITDA and Adjusted EBITDA as supplemental disclosures because its management believes that EBITDA and Adjusted EBITDA provide useful information regarding its ability to service debt and to fund capital expenditures and provide investors a helpful measure for comparing the Civeo's operating performance with the performance of other companies that have different financing and capital structures or tax rates. Civeo uses EBITDA and Adjusted EBITDA to compare and to monitor the performance of its business segments to other comparable public companies and as a benchmark for the award of incentive compensation under its annual incentive compensation plan.
The following table sets forth a reconciliation of EBITDA and Adjusted EBITDA to net loss attributable to Civeo Corporation, which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles (in thousands) (unaudited):
*THREE MONTHS ENDED*
* SEPTEMBER 30,* *NINE MONTHS ENDED*
* SEPTEMBER 30,*
*2018* *2017* *2018* *2017*
Net income (loss) attributable to Civeo Corporation $ (13,638 ) $ (22,331 ) $ (68,928 ) $ (58,134 )
Income tax provision (benefit) (5,330 ) (4,011 ) (29,386 ) (9,875 )
Depreciation and amortization 34,468 32,700 99,502 97,083
Interest income (16 ) (49 ) (92 ) (69 )
Loss on extinguishment of debt - - 748 842
Interest expense 6,404 5,441 19,329 15,697
EBITDA $ 21,888 $ 11,750 $ 21,173 $ 45,544
Adjustments to EBITDA
Impairment expense (a) - 4,360 28,661 4,360
Noralta transaction costs (b) 464 - 7,041 -
Adjusted EBITDA $ 22,352 $ 16,110 $ 56,875 $ 49,904
(a) Relates to the first quarter 2018 and third quarter 2017 impairment of assets in Canada. During the first quarter 2018, we recorded a pre-tax loss of $28.7 million ($20.9 million after-tax, or $0.14 per diluted share), which is included in Impairment expense on the unaudited statements of operations. During the third quarter 2017, we recorded a pre-tax loss of $4.4 million ($3.2 million after-tax, or $0.02 per diluted share), which is included in Impairment expense on the unaudited statements of operations.
(b) Relates to costs incurred associated with Civeo's acquisition of Noralta Lodge Ltd. For the nine month period ended September 30, 2018, the $7.0 million of costs in 2018 ($6.3 million after-tax, or $0.04, per diluted share), are reflected in the Canada ($2.3 million) and Corporate and eliminations ($4.7 million) reportable segments and are included in Costs of sales and services ($0.3 million) and Selling, general and administrative expenses ($6.7 million) on the unaudited statements of operations. For the three month period ended September 30, 2018, the $0.5 million of costs in 2018 ($0.4 million after-tax, or $0.00, per diluted share), are reflected in the Canada ($0.4 million) and Corporate and eliminations ($0.1 million) reportable segments and are included in Costs of sales and services ($0.2 million) and Selling, general and administrative expenses ($0.3 million) on the unaudited statements of operations.
(2) The term Free Cash Flow is defined as net cash flows provided by operating activities less capital expenditures plus proceeds from asset sales. Free Cash Flow is not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation from or as a substitute for cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. Additionally, Free Cash Flow may not be comparable to other similarly titled measures of other companies. Civeo has included Free Cash Flow as a supplemental disclosure because its management believes that Free Cash Flow provides useful information regarding the cash flow generating ability of its business relative to its capital expenditure and debt service obligations. Civeo uses Free Cash Flow to compare and to understand, manage, make operating decisions and evaluate Civeo's business. It is also used as a benchmark for the award of incentive compensation under its Free Cash Flow plan.
The following table sets forth a reconciliation of Free Cash Flow to Net Cash Flows Provided by Operating Activities, which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles (in thousands) (unaudited):
*THREE MONTHS ENDED*
* SEPTEMBER 30,* *NINE MONTHS ENDED*
* SEPTEMBER 30,*
*2018* *2017* *2018* *2017*
Net Cash Flows Provided by Operating Activities $ 11,885 $ 31,124 $ 25,862 $ 45,525
Capital expenditures, including capitalized interest (2,723 ) (1,983 ) (8,666 ) (8,020 )
Proceeds from disposition of property, plant and equipment 600 465 4,038 1,625
Free Cash Flow $ 9,762 $ 29,606 $ 21,234 $ 39,130
*CIVEO CORPORATION*
* NON-GAAP RECONCILIATIONS - GUIDANCE*
* (in millions)*
* (unaudited)*
*THREE MONTHS ENDING
DECEMBER 31, 2018* *YEAR ENDING *
* DECEMBER 31, 2018*
EBITDA Range (1) $ 17.0 $ 20.0 $ 38.3 $ 41.3
Adjusted EBITDA Range (1) $ 17.0 $ 20.0 $ 74.0 $ 77.0
(1) The following table sets forth a reconciliation of estimated EBITDA and Adjusted EBITDA to estimated net loss, which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles (in millions) (unaudited):
*THREE MONTHS ENDING
DECEMBER 31, 2018* *YEAR ENDING *
* DECEMBER 31, 2018*
*(estimated)* *(estimated)*
Net loss $ (20.5 ) $ (18.5 ) $ (89.3 ) $ (87.3 )
Income tax provision (benefit) (3.0 ) (2.0 ) (32.4 ) (31.4 )
Depreciation and amortization 34.5 34.5 134.0 134.0
Interest expense 6.0 6.0 26.0 26.0
EBITDA $ 17.0 $ 20.0 $ 38.3 $ 41.3
Adjustments to EBITDA
Impairment expense (a) - - 28.7 28.7
Noralta transaction costs (b) - - 7.0 7.0
Adjusted EBITDA $ 17.0 $ 20.0 $ 74.0 $ 77.0
(a) Relates to the first quarter 2018 impairment of assets in Canada. During the first quarter 2018, we recorded a pre-tax loss of $28.7 million ($20.9 million after-tax, or $0.14 per diluted share), which is included in Impairment expense on the unaudited statements of operations.
(b) Relates to costs incurred associated with Civeo's acquisition of Noralta Lodge Ltd. For the nine month period ended September 30, 2018, the $7.0 million of costs in 2018 ($6.3 million after-tax, or $0.04, per diluted share), are reflected in the Canada ($2.3 million) and Corporate and eliminations ($4.7 million) reportable segments and are included in Costs of sales and services ($0.3 million) and Selling, general and administrative expenses ($6.7 million) on the unaudited statements of operations.
*CIVEO CORPORATION*
* SUPPLEMENTAL QUARTERLY SEGMENT AND OPERATING DATA*
* (U.S. dollars in thousands, except for room counts and average daily rates)*
* (unaudited)*
*THREE MONTHS ENDED*
* SEPTEMBER 30,* *NINE MONTHS ENDED*
* SEPTEMBER 30,*
*2018* *2017* *2018* *2017*
*Supplemental Operating Data - Canadian Segment*
Revenues
Accommodation revenue (1) $ 72,991 $ 60,018 $ 204,258 $ 169,891
Mobile facility rental revenue (2) 135 579 9,283 1,380
Catering and other services revenue (3) 3,627 3,037 11,082 9,121
Manufacturing revenue (4) - 198 2,038 1,614
Total Canadian revenues $ 76,753 $ 63,832 $ 226,661 $ 182,006
Average available lodge rooms (5) 22,707 14,720 19,975 14,720
Rentable rooms (6) 13,406 8,698 12,362 8,564
Average daily rates (7) $ 89 $ 92 $ 88 $ 93
Billed rooms (8) 816,295 646,642 2,320,012 1,822,617
Occupancy in lodges (9) 66 % 81 % 69 % 78 %
Canadian dollar to U.S. dollar $ 0.765 $ 0.799 $ 0.777 $ 0.766
*Supplemental Operating Data - Australian Segment*
Accommodation revenue (1) $ 30,679 $ 27,541 $ 88,343 $ 83,164
Catering and other services revenue (3) 411 - 1,199 -
Total Australian revenues $ 31,090 $ 27,541 $ 89,542 $ 83,164
Average available village rooms (5) 9,346 9,359 9,346 9,377
Rentable rooms (6) 8,739 8,725 8,731 8,753
Average daily rates (7) $ 77 $ 81 $ 79 $ 81
Billed rooms (8) 396,747 340,467 1,114,695 1,030,068
Occupancy in villages (9) 49 % 42 % 47 % 43 %
Australian dollar to U.S. dollar $ 0.731 $ 0.790 $ 0.758 $ 0.766
(1) Includes revenues related to lodge, village and open camp rooms.
(2) Includes revenues related to mobile camps.
(3) Includes revenues related to catering and food services, laundry and water and wastewater treatment services.
(4) Includes revenues related to modular construction and manufacturing services.
(5) Average available rooms relate to Canadian lodges and Australian villages and includes rooms that are utilized for our personnel.
(6) Rentable rooms relate to Canadian lodges and Australian villages and excludes rooms that are utilized for our personnel and out-of-service rooms.
(7) Average daily rate is based on rentable rooms and lodge/village revenue.
(8) Billed rooms represents total billed days.
(9) Occupancy represents total billed days divided by rentable days. Rentable days excludes staff rooms and out-of-service rooms.
Reported by GlobeNewswire 1 hour ago.
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Intercept Pharmaceuticals Reports Third Quarter 2018 Financial Results and Provides Business Update
· Worldwide Ocaliva net sales of $46.6 million in the third quarter of 2018
· Leading Phase 3 NASH program continues to advance: REGENERATE trial in NASH patients with advanced liver fibrosis expected to report data in the first half of 2019
Conference call scheduled for 8:30 a.m. ET today
NEW YORK, Oct. 31, 2018 (GLOBE NEWSWIRE) -- Intercept Pharmaceuticals, Inc. (Nasdaq:ICPT), a biopharmaceutical company focused on the development and commercialization of novel therapeutics to treat progressive non-viral liver diseases, today announced its financial results for the quarter ended September 30, 2018.
“2018 has been an important year for Intercept as we have continued to make progress executing against our key strategic priorities in our Phase 3 NASH program and our PBC commercial efforts,” said Mark Pruzanski, M.D., President and Chief Executive Officer of Intercept. “We remain on track to report top line data from the Phase 3 REGENERATE trial in the first half of 2019. We have also continued to advance our efforts to bring Ocaliva to eligible PBC patients in need and believe that we are well positioned to drive growth and capitalize on this sizeable market opportunity.”
*Ocaliva® (obeticholic acid or OCA) Commercial Highlights*
We recorded $46.6 million of Ocaliva net sales in the third quarter of 2018, as compared to $40.9 million in the prior year quarter. Ocaliva net sales in the third quarter of 2018 were comprised of U.S. net sales of $36.7 million and ex-U.S. net sales of $9.9 million, as compared to U.S. net sales of $36.2 million and ex-U.S. net sales of $4.7 million in the prior year quarter.
Ocaliva was approved in the United States by the U.S. Food and Drug Administration (“FDA”) in May 2016 for the treatment of primary biliary cholangitis (“PBC”) in combination with ursodeoxycholic acid (“UDCA”) in adults with an inadequate response to UDCA or as monotherapy in adults unable to tolerate UDCA. We commenced sales and marketing of Ocaliva in the United States shortly after receiving marketing approval, and Ocaliva is now available to patients primarily through a network of specialty pharmacy distributors.
Ocaliva was granted conditional approval by the European Commission in December 2016 for the treatment of PBC in combination with UDCA in adults with an inadequate response to UDCA or as monotherapy in adults unable to tolerate UDCA, and we commenced our European commercial launch in January 2017. Since January 2017, Ocaliva has also received regulatory approval in several of our target markets outside the United States and Europe, including Canada, Israel and Australia.
*Selected Third Quarter 2018 Financial Results*
*Revenues*
We recognized $47.0 million in total revenue in the quarter ended September 30, 2018, up from $41.3 million in total revenue in the quarter ended September 30, 2017. Total revenue in the third quarter of 2018 included $46.6 million of Ocaliva net sales and approximately $0.4 million of licensing revenue related to the amortization of upfront payments under our license agreement with Sumitomo Dainippon Pharma Co., Ltd., as compared to $40.9 million and approximately $0.4 million, respectively, in the prior year quarter. Included in total revenue in the third quarter of 2017 is $4.1 million of previously deferred revenue recognized in connection with our adoption of a sell-in basis revenue recognition policy in such quarter.
*Operating Expenses*
Our cost of sales was $0.5 million in the third quarter of 2018, as compared to $0.2 million in the prior year quarter. Prior to the FDA’s approval of Ocaliva, we expensed costs related to the manufacturing and buildup of our Ocaliva commercial launch supplies. As a result, our cost of sales in the quarters ended September 30, 2018 and 2017 consisted primarily of packaging and labeling expenses.
Our selling, general and administrative expenses decreased to $56.8 million in the quarter ended September 30, 2018, down from $61.4 million in the prior year quarter. The decrease was primarily driven by a decrease in consultant spend and personnel-related costs.
Research and development expenses increased to $47.9 million in the quarter ended September 30, 2018, up from $46.0 million in the prior year quarter. The increase was primarily driven by an increase in OCA research and development activities and other costs.
In the quarters ended September 30, 2018 and 2017, we recorded $105.3 million and $107.5 million, respectively, in total operating expenses and $92.2 million and $92.9 million, respectively, in non-GAAP adjusted operating expenses, which excludes non-cash stock-based compensation expense of $12.0 million and $13.2 million, respectively, and depreciation expense of $1.1 million and $1.4 million, respectively. References in this press release to “non-GAAP adjusted operating expenses” mean our total operating expenses, as calculated and presented in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), adjusted for the effects of two non-cash items: stock-based compensation and depreciation. See “Non-GAAP Financial Measures” below. A reconciliation of non-GAAP adjusted operating expenses to total operating expenses for all historical periods presented is included below under the heading “Reconciliation of Non-GAAP Adjusted Operating Expenses to Total Operating Expenses”.
Interest Expense
Our interest expense in the quarters ended September 30, 2018 and 2017 was $7.7 million and $7.4 million, respectively. Our interest expense is related to the $460.0 million aggregate principal amount of 3.25% Convertible Senior Notes due 2023 (the “Convertible Notes”) that we issued in July 2016.
Net Loss
During the third quarter of 2018, we reported a net loss of $64.5 million, down from a net loss of $72.6 million in the prior year quarter.
*Cash Position*
As of September 30, 2018, we had cash, cash equivalents and investment securities available for sale of approximately $489.1 million. As of December 31, 2017, we had cash, cash equivalents and investment securities available for sale of approximately $414.9 million.
*2018 Financial Guidance*
Based on our third quarter results and our current outlook for the remainder of 2018, we are confirming our previously announced 2018 Ocaliva net sales guidance range of between $170 million and $185 million. In addition, we are confirming our previously announced 2018 non-GAAP adjusted operating expenses guidance range of between $390 million and $410 million. See “Non-GAAP Financial Measures” below. A quantitative reconciliation of projected non-GAAP adjusted operating expenses to total operating expenses is not available without unreasonable effort primarily due to our inability to predict with reasonable certainty the amount of future stock-based compensation expense.
*Conference Call on October 31, 2018 at 8:30 a.m. ET*
We are hosting our third quarter 2018 financial results conference call and webcast on Wednesday, October 31, 2018 at 8:30 a.m. ET. The conference call will be available on the investor page of our website at http://ir.interceptpharma.com or by calling (855) 232-3919 (toll-free domestic) or (315) 625-6894 (international) five minutes prior to the start time (no passcode is required). A replay of the call will be available on our website shortly following the completion of the call and will be available for two weeks.
*About Intercept*
Intercept is a biopharmaceutical company focused on the development and commercialization of novel therapeutics to treat progressive non-viral liver diseases, including primary biliary cholangitis (PBC), nonalcoholic steatohepatitis (NASH), primary sclerosing cholangitis (PSC) and biliary atresia. Founded in 2002 in New York, Intercept has operations in the United States, Europe and Canada.
*Non-GAAP Financial Measures*
This press release presents non-GAAP adjusted operating expenses on a historical and projected basis. For the periods presented, non-GAAP adjusted operating expenses exclude from total operating expenses, as calculated and presented in accordance with GAAP, the effects of two non-cash items: stock-based compensation and depreciation. Non-GAAP adjusted operating expenses is a financial measure that has not been prepared in accordance with GAAP. Accordingly, investors should consider non-GAAP adjusted operating expenses in addition to, but not as a substitute for, total operating expenses that we calculate and present in accordance with GAAP. Among other things, our management uses non-GAAP adjusted operating expenses to establish budgets and operational goals and to manage our business. Other companies may define or use this measure in different ways. We believe that the presentation of non-GAAP adjusted operating expenses provides investors and management with helpful supplemental information relating to operating performance and trends. A table reconciling non-GAAP adjusted operating expenses to total operating expenses for all historical periods presented is included below under the heading “Reconciliation of Non-GAAP Adjusted Operating Expenses to Total Operating Expenses”. A quantitative reconciliation of projected non-GAAP adjusted operating expenses to total operating expenses is not available without unreasonable effort primarily due to our inability to predict with reasonable certainty the amount of future stock-based compensation expense.
*About Ocaliva® (obeticholic acid)*
Ocaliva is indicated in the United States for the treatment of primary biliary cholangitis (PBC) in combination with ursodeoxycholic acid (UDCA) in adults with an inadequate response to UDCA, or as monotherapy in adults unable to tolerate UDCA.
This indication is approved under accelerated approval based on a reduction in alkaline phosphatase (ALP) as a surrogate endpoint which is reasonably likely to predict clinical benefit, including an improvement in liver transplant free-survival. An improvement in survival or disease-related symptoms has not been established. Continued approval for this indication may be contingent upon verification and description of clinical benefit in confirmatory trials. We are conducting a Phase 4 clinical outcomes trial, which we refer to as our COBALT trial, of OCA in patients with PBC with the goal of confirming clinical benefit on a post-marketing basis.
In December 2016, Ocaliva received conditional marketing authorization in Europe for the treatment of PBC in combination with UDCA in adults with an inadequate response to UDCA or as monotherapy in adults unable to tolerate UDCA, conditioned upon us providing further data post-approval to confirm benefit. For detailed safety information for Ocaliva 5 mg and 10 mg tablets including posology and method of administration, special warnings, drug interactions and adverse drug reactions, please see the European Summary of Product Characteristics that can be found on www.ema.europa.eu.
*U.S. IMPORTANT SAFETY INFORMATION*
*WARNING: HEPATIC DECOMPENSATION AND FAILURE IN INCORRECTLY DOSED PBC PATIENTS WITH CHILD-PUGH CLASS B OR C OR DECOMPENSATED CIRRHOSIS
*
· *In postmarketing reports, hepatic decompensation and failure, in some cases fatal, have been reported in patients with Primary Biliary Cholangitis (PBC) with decompensated cirrhosis or Child-Pugh Class B or C hepatic impairment when OCALIVA was dosed more frequently than recommended.*
· *The recommended starting dosage of OCALIVA is 5 mg once weekly for patients with Child-Pugh Class B or C hepatic impairment or a prior decompensation event.*
*Contraindications*
OCALIVA is contraindicated in patients with complete biliary obstruction.
*Warnings and Precautions*
*Hepatic Decompensation and Failure in Incorrectly-Dosed PBC Patients with Child-Pugh Class B or C or Decompensated Cirrhosis*
In postmarketing reports, hepatic decompensation and failure, in some cases fatal, have been reported in patients with decompensated cirrhosis or Child-Pugh B or C hepatic impairment when OCALIVA was dosed more frequently than the recommended starting dosage of 5 mg once weekly. Reported cases typically occurred within 2 to 5 weeks after starting OCALIVA and were characterized by an acute increase in total bilirubin and/or ALP concentrations in association with clinical signs and symptoms of hepatic decompensation (e.g., ascites, jaundice, gastrointestinal bleeding, worsening of hepatic encephalopathy).
Routinely monitor patients for progression of PBC disease, including liver-related complications, with laboratory and clinical assessments. Dosage adjustment, interruption or discontinuation may be required. Close monitoring is recommended for patients at an increased risk of hepatic decompensation. Severe intercurrent illnesses that may worsen renal function or cause dehydration (e.g., gastroenteritis), may exacerbate the risk of hepatic decompensation. Interrupt treatment with OCALIVA in patients with laboratory or clinical evidence of worsening liver function indicating risk of decompensation, and monitor the patient’s liver function. Consider discontinuing OCALIVA in patients who have experienced clinically significant liver-related adverse reactions. Discontinue OCALIVA in patients who develop complete biliary obstruction.
*Liver-Related Adverse Reactions*
Dose-related, liver-related adverse reactions including jaundice, worsening ascites and primary biliary cholangitis flare have been observed in clinical trials, as early as one month after starting treatment with OCALIVA 10 mg once daily up to 50 mg once daily (up to 5-times the highest recommended dosage). Monitor patients during treatment with OCALIVA for elevations in liver biochemical tests and for the development of liver-related adverse reactions.
**Severe Pruritus**
Severe pruritus was reported in 23% of patients in the OCALIVA 10 mg arm, 19% of patients in the OCALIVA titration arm, and 7% of patients in the placebo arm in a 12-month double-blind randomized controlled trial of 216 patients. Severe pruritus was defined as intense or widespread itching, interfering with activities of daily living, or causing severe sleep disturbance, or intolerable discomfort, and typically requiring medical interventions. Consider clinical evaluation of patients with new onset or worsening severe pruritus. Management strategies include the addition of bile acid resins or antihistamines, OCALIVA dosage reduction, and/or temporary interruption of OCALIVA dosing.
*Reduction in HDL-C*
Patients with PBC generally exhibit hyperlipidemia characterized by a significant elevation in total cholesterol primarily due to increased levels of high-density lipoprotein-cholesterol (HDL-C). Dose-dependent reductions from baseline in mean HDL-C levels were observed at 2 weeks in OCALIVA-treated patients, 20% and 9% in the 10 mg and titration arms, respectively, compared to 2% in the placebo arm. Monitor patients for changes in serum lipid levels during treatment. For patients who do not respond to OCALIVA after 1 year at the highest recommended dosage that can be tolerated (maximum of 10 mg once daily), and who experience a reduction in HDL-C, weigh the potential risks against the benefits of continuing treatment.
*Adverse Reactions*
The most common adverse reactions from subjects taking OCALIVA were pruritus, fatigue, abdominal pain and discomfort, rash, oropharyngeal pain, dizziness, constipation, arthralgia, thyroid function abnormality, and eczema.
*Drug Interactions*
*Bile Acid Binding Resins*
Bile acid binding resins such as cholestyramine, colestipol, or colesevelam adsorb and reduce bile acid absorption and may reduce the absorption, systemic exposure, and efficacy of OCALIVA. If taking a bile acid binding resin, take OCALIVA at least 4 hours before or 4 hours after taking the bile acid binding resin, or at as great an interval as possible.
*Warfarin*
The International Normalized Ratio (INR) decreased following coadministration of warfarin and OCALIVA. Monitor INR and adjust the dose of warfarin, as needed, to maintain the target INR range when coadministering OCALIVA and warfarin.
*CYP1A2 Substrates with Narrow Therapeutic Index*
Obeticholic acid, the active ingredient in OCALIVA, may increase the exposure to concomitant drugs that are CYP1A2 substrates. Therapeutic monitoring of CYP1A2 substrates with a narrow therapeutic index (e.g. theophylline and tizanidine) is recommended when coadministered with OCALIVA.
*Inhibitors of Bile Salt Efflux Pump*
Avoid concomitant use of inhibitors of the bile salt efflux pump (BSEP) such as cyclosporine. Concomitant medications that inhibit canalicular membrane bile acid transporters such as the BSEP may exacerbate accumulation of conjugated bile salts including taurine conjugate of obeticholic acid in the liver and result in clinical symptoms. If concomitant use is deemed necessary, monitor serum transaminases and bilirubin.
Please see *Full Prescribing Information, including Boxed WARNING* and *Medication Guide* for OCALIVA.
*To report SUSPECTED ADVERSE REACTIONS, contact Intercept Pharmaceuticals, Inc. at 1-844-782-ICPT or FDA at 1-800-FDA-1088 or www.fda.gov/medwatch.*
*Cautionary Note Regarding Forward-Looking Statements
*
This press release contains forward-looking statements, including, but not limited to, statements regarding the progress, timing and results of our clinical trials, including our clinical trials for the treatment of nonalcoholic steatohepatitis (“NASH”), the safety and efficacy of our approved product, Ocaliva (obeticholic acid or “OCA”), the potential approval of OCA for indications other than primary biliary cholangitis (“PBC”), the timing and potential commercial success of OCA and any other product candidates we may develop and our strategy, future operations, future financial position, future revenue, projected costs, financial guidance, prospects, plans, objectives of management and expected market growth.
These statements constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “possible,” “continue” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release, and we undertake no obligation to update any forward-looking statement except as required by law. These forward-looking statements are based on estimates and assumptions by our management that, although believed to be reasonable, are inherently uncertain and subject to a number of risks. The following represent some, but not necessarily all, of the factors that could cause actual results to differ materially from historical results or those anticipated or predicted by our forward-looking statements: our ability to successfully commercialize Ocaliva for PBC; our ability to maintain our regulatory approval of Ocaliva for PBC in the United States, Europe, Canada, Israel, Australia and other jurisdictions in which we have or may receive marketing authorization; the initiation, timing, cost, conduct, progress and results of our research and development activities, preclinical studies and clinical trials, including any issues, delays or failures in identifying patients, enrolling patients, treating patients or completing and timely reporting the results of our NASH or PBC clinical trials; our ability to timely and cost-effectively obtain regulatory approval of our product candidates, including OCA for NASH; conditions that may be imposed by regulatory authorities on our marketing approvals for our products and product candidates, such as the need for clinical outcomes data (and not just results based on achievement of a surrogate endpoint), and any related restrictions, limitations and/or warnings contained in the label of any of our products or product candidates; any potential side effects associated with Ocaliva for PBC, OCA for NASH or our other product candidates that could delay or prevent approval, require that an approved product be taken off the market, require the inclusion of safety warnings or precautions or otherwise limit the sale of such product or product candidate; our ability to maintain our relationships with, and the performance of, third-party vendors upon whom we are substantially dependent, including contract research organizations for our clinical trials and our third-party suppliers and manufacturers; our ability to identify, develop and commercialize our products and product candidates; our ability to obtain and maintain intellectual property protection for our products and product candidates; our ability to successfully commercialize our product candidates, if approved; the size and growth of the markets for our products and product candidates and our ability to serve those markets; the degree of market acceptance of Ocaliva for PBC and, if approved, OCA for NASH or our other product candidates, which may be affected by the ability of patients and healthcare providers to obtain coverage or reimbursement from payors for our products and the extent to which such coverage or reimbursement is provided; our ability to establish and maintain an effective sales and marketing infrastructure directly or through collaborations with third parties; competition from existing drugs or new drugs that become available; our ability to prevent system failures, data breaches or violations of data protection laws; costs and outcomes relating to any disputes, governmental inquiries or investigations, legal proceedings or litigation, including any securities, intellectual property, employment, product liability or other litigation; our collaborators’ election to pursue research, development and commercialization activities; our ability to attract and maintain collaborators with development, regulatory and commercialization expertise; our need for and ability to obtain additional financing; our estimates regarding expenses, revenues and capital requirements and the accuracy thereof; our use of cash and short-term investments; our ability to acquire, license and invest in businesses, technologies, product candidates and products; our ability to attract and retain key personnel to manage our business effectively; our ability to manage the growth of our operations, infrastructure, personnel, systems and controls; our ability to obtain and maintain adequate insurance coverage; and the other risks and uncertainties identified in our periodic filings filed with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2017.
*Contact*
For more information about Intercept, please contact:
Mark Vignola
+1-646-747-1000
investors@interceptpharma.com
Christopher Frates
+1-646-757-2371
media@interceptpharma.com
*Intercept Pharmaceuticals, Inc.*
*Condensed Consolidated Statements of Operations*
(Unaudited)
(In thousands, except per share data)
*Three Months Ended
September 30,* *Nine Months Ended*
* September 30,*
*2018* *2017* *2018* *2017*
Revenue:
Product revenue, net $ 46,581 $ 40,889 $ 124,908 $ 91,933
Licensing revenue 405 445 1,616 1,336
Total revenue 46,986 41,334 126,524 93,269
Operating expenses:
Cost of sales 519 172 1,512 548
Selling, general and administrative 56,812 61,356 184,503 189,363
Research and development 47,941 45,977 144,028 134,001
Total operating expenses 105,272 107,505 330,043 323,912
Operating loss (58,286 ) (66,171 ) (203,519 ) (230,643 )
Other income (expense):
Interest expense (7,671 ) (7,354 ) (22,769 ) (21,840 )
Other income, net 1,503 924 5,051 3,388
(6,168 ) (6,430 ) (17,718 ) (18,452 )
Net loss $ (64,454 ) $ (72,601 ) $ (221,237 ) $ (249,095 )
Net loss per common and potential common share:
Basic and diluted $ (2.18 ) $ (2.89 ) $ (7.89 ) $ (9.96 )
Weighted average common and potential common shares outstanding:
Basic and diluted 29,615 25,104 28,057 25,021
*Condensed Consolidated Balance Sheet Information*
(In thousands)
*September 30, *
* 2018* *December 31,*
* 2017(1)*
*(Unaudited)*
Cash, cash equivalents and investment securities $ 489,093 $ 414,917
Total assets $ 556,953 $ 484,347
Deferred revenue, total $ 2,838 $ 4,454
Total liabilities (2) $ 461,144 $ 467,961
Stockholders’ equity $ 95,809 $ 16,386
_________
(1) Derived from the audited financial statements included in Intercept’s Annual Report on Form 10-K for the year ended December 31, 2017.
(2) Includes $367.2 million and $355.7 million related to the Convertible Notes as of September 30, 2018 and December 31, 2017, respectively. Intercept separately accounts for the debt and equity components of the Convertible Notes. The aggregate outstanding principal amount of the Convertible Notes was $460.0 million as of September 30, 2018 and December 31, 2017.
*Reconciliation of Non-GAAP Adjusted Operating Expenses to Total Operating Expenses*
(Unaudited)
(In thousands)
*Three Months Ended
September 30,* *Nine Months Ended
September 30,*
*2018* *2017* *2018* *2017*
Total operating expenses $ 105,272 $ 107,505 $ 330,043 $ 323,912
Adjustments:
Stock-based compensation 11,994 13,237 38,415 41,584
Depreciation 1,123 1,382 3,551 3,256
Non-GAAP adjusted operating expenses $ 92,155 $ 92,886 $ 288,077 $ 279,072
Reported by GlobeNewswire 5 minutes ago.
· Leading Phase 3 NASH program continues to advance: REGENERATE trial in NASH patients with advanced liver fibrosis expected to report data in the first half of 2019
Conference call scheduled for 8:30 a.m. ET today
NEW YORK, Oct. 31, 2018 (GLOBE NEWSWIRE) -- Intercept Pharmaceuticals, Inc. (Nasdaq:ICPT), a biopharmaceutical company focused on the development and commercialization of novel therapeutics to treat progressive non-viral liver diseases, today announced its financial results for the quarter ended September 30, 2018.
“2018 has been an important year for Intercept as we have continued to make progress executing against our key strategic priorities in our Phase 3 NASH program and our PBC commercial efforts,” said Mark Pruzanski, M.D., President and Chief Executive Officer of Intercept. “We remain on track to report top line data from the Phase 3 REGENERATE trial in the first half of 2019. We have also continued to advance our efforts to bring Ocaliva to eligible PBC patients in need and believe that we are well positioned to drive growth and capitalize on this sizeable market opportunity.”
*Ocaliva® (obeticholic acid or OCA) Commercial Highlights*
We recorded $46.6 million of Ocaliva net sales in the third quarter of 2018, as compared to $40.9 million in the prior year quarter. Ocaliva net sales in the third quarter of 2018 were comprised of U.S. net sales of $36.7 million and ex-U.S. net sales of $9.9 million, as compared to U.S. net sales of $36.2 million and ex-U.S. net sales of $4.7 million in the prior year quarter.
Ocaliva was approved in the United States by the U.S. Food and Drug Administration (“FDA”) in May 2016 for the treatment of primary biliary cholangitis (“PBC”) in combination with ursodeoxycholic acid (“UDCA”) in adults with an inadequate response to UDCA or as monotherapy in adults unable to tolerate UDCA. We commenced sales and marketing of Ocaliva in the United States shortly after receiving marketing approval, and Ocaliva is now available to patients primarily through a network of specialty pharmacy distributors.
Ocaliva was granted conditional approval by the European Commission in December 2016 for the treatment of PBC in combination with UDCA in adults with an inadequate response to UDCA or as monotherapy in adults unable to tolerate UDCA, and we commenced our European commercial launch in January 2017. Since January 2017, Ocaliva has also received regulatory approval in several of our target markets outside the United States and Europe, including Canada, Israel and Australia.
*Selected Third Quarter 2018 Financial Results*
*Revenues*
We recognized $47.0 million in total revenue in the quarter ended September 30, 2018, up from $41.3 million in total revenue in the quarter ended September 30, 2017. Total revenue in the third quarter of 2018 included $46.6 million of Ocaliva net sales and approximately $0.4 million of licensing revenue related to the amortization of upfront payments under our license agreement with Sumitomo Dainippon Pharma Co., Ltd., as compared to $40.9 million and approximately $0.4 million, respectively, in the prior year quarter. Included in total revenue in the third quarter of 2017 is $4.1 million of previously deferred revenue recognized in connection with our adoption of a sell-in basis revenue recognition policy in such quarter.
*Operating Expenses*
Our cost of sales was $0.5 million in the third quarter of 2018, as compared to $0.2 million in the prior year quarter. Prior to the FDA’s approval of Ocaliva, we expensed costs related to the manufacturing and buildup of our Ocaliva commercial launch supplies. As a result, our cost of sales in the quarters ended September 30, 2018 and 2017 consisted primarily of packaging and labeling expenses.
Our selling, general and administrative expenses decreased to $56.8 million in the quarter ended September 30, 2018, down from $61.4 million in the prior year quarter. The decrease was primarily driven by a decrease in consultant spend and personnel-related costs.
Research and development expenses increased to $47.9 million in the quarter ended September 30, 2018, up from $46.0 million in the prior year quarter. The increase was primarily driven by an increase in OCA research and development activities and other costs.
In the quarters ended September 30, 2018 and 2017, we recorded $105.3 million and $107.5 million, respectively, in total operating expenses and $92.2 million and $92.9 million, respectively, in non-GAAP adjusted operating expenses, which excludes non-cash stock-based compensation expense of $12.0 million and $13.2 million, respectively, and depreciation expense of $1.1 million and $1.4 million, respectively. References in this press release to “non-GAAP adjusted operating expenses” mean our total operating expenses, as calculated and presented in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), adjusted for the effects of two non-cash items: stock-based compensation and depreciation. See “Non-GAAP Financial Measures” below. A reconciliation of non-GAAP adjusted operating expenses to total operating expenses for all historical periods presented is included below under the heading “Reconciliation of Non-GAAP Adjusted Operating Expenses to Total Operating Expenses”.
Interest Expense
Our interest expense in the quarters ended September 30, 2018 and 2017 was $7.7 million and $7.4 million, respectively. Our interest expense is related to the $460.0 million aggregate principal amount of 3.25% Convertible Senior Notes due 2023 (the “Convertible Notes”) that we issued in July 2016.
Net Loss
During the third quarter of 2018, we reported a net loss of $64.5 million, down from a net loss of $72.6 million in the prior year quarter.
*Cash Position*
As of September 30, 2018, we had cash, cash equivalents and investment securities available for sale of approximately $489.1 million. As of December 31, 2017, we had cash, cash equivalents and investment securities available for sale of approximately $414.9 million.
*2018 Financial Guidance*
Based on our third quarter results and our current outlook for the remainder of 2018, we are confirming our previously announced 2018 Ocaliva net sales guidance range of between $170 million and $185 million. In addition, we are confirming our previously announced 2018 non-GAAP adjusted operating expenses guidance range of between $390 million and $410 million. See “Non-GAAP Financial Measures” below. A quantitative reconciliation of projected non-GAAP adjusted operating expenses to total operating expenses is not available without unreasonable effort primarily due to our inability to predict with reasonable certainty the amount of future stock-based compensation expense.
*Conference Call on October 31, 2018 at 8:30 a.m. ET*
We are hosting our third quarter 2018 financial results conference call and webcast on Wednesday, October 31, 2018 at 8:30 a.m. ET. The conference call will be available on the investor page of our website at http://ir.interceptpharma.com or by calling (855) 232-3919 (toll-free domestic) or (315) 625-6894 (international) five minutes prior to the start time (no passcode is required). A replay of the call will be available on our website shortly following the completion of the call and will be available for two weeks.
*About Intercept*
Intercept is a biopharmaceutical company focused on the development and commercialization of novel therapeutics to treat progressive non-viral liver diseases, including primary biliary cholangitis (PBC), nonalcoholic steatohepatitis (NASH), primary sclerosing cholangitis (PSC) and biliary atresia. Founded in 2002 in New York, Intercept has operations in the United States, Europe and Canada.
*Non-GAAP Financial Measures*
This press release presents non-GAAP adjusted operating expenses on a historical and projected basis. For the periods presented, non-GAAP adjusted operating expenses exclude from total operating expenses, as calculated and presented in accordance with GAAP, the effects of two non-cash items: stock-based compensation and depreciation. Non-GAAP adjusted operating expenses is a financial measure that has not been prepared in accordance with GAAP. Accordingly, investors should consider non-GAAP adjusted operating expenses in addition to, but not as a substitute for, total operating expenses that we calculate and present in accordance with GAAP. Among other things, our management uses non-GAAP adjusted operating expenses to establish budgets and operational goals and to manage our business. Other companies may define or use this measure in different ways. We believe that the presentation of non-GAAP adjusted operating expenses provides investors and management with helpful supplemental information relating to operating performance and trends. A table reconciling non-GAAP adjusted operating expenses to total operating expenses for all historical periods presented is included below under the heading “Reconciliation of Non-GAAP Adjusted Operating Expenses to Total Operating Expenses”. A quantitative reconciliation of projected non-GAAP adjusted operating expenses to total operating expenses is not available without unreasonable effort primarily due to our inability to predict with reasonable certainty the amount of future stock-based compensation expense.
*About Ocaliva® (obeticholic acid)*
Ocaliva is indicated in the United States for the treatment of primary biliary cholangitis (PBC) in combination with ursodeoxycholic acid (UDCA) in adults with an inadequate response to UDCA, or as monotherapy in adults unable to tolerate UDCA.
This indication is approved under accelerated approval based on a reduction in alkaline phosphatase (ALP) as a surrogate endpoint which is reasonably likely to predict clinical benefit, including an improvement in liver transplant free-survival. An improvement in survival or disease-related symptoms has not been established. Continued approval for this indication may be contingent upon verification and description of clinical benefit in confirmatory trials. We are conducting a Phase 4 clinical outcomes trial, which we refer to as our COBALT trial, of OCA in patients with PBC with the goal of confirming clinical benefit on a post-marketing basis.
In December 2016, Ocaliva received conditional marketing authorization in Europe for the treatment of PBC in combination with UDCA in adults with an inadequate response to UDCA or as monotherapy in adults unable to tolerate UDCA, conditioned upon us providing further data post-approval to confirm benefit. For detailed safety information for Ocaliva 5 mg and 10 mg tablets including posology and method of administration, special warnings, drug interactions and adverse drug reactions, please see the European Summary of Product Characteristics that can be found on www.ema.europa.eu.
*U.S. IMPORTANT SAFETY INFORMATION*
*WARNING: HEPATIC DECOMPENSATION AND FAILURE IN INCORRECTLY DOSED PBC PATIENTS WITH CHILD-PUGH CLASS B OR C OR DECOMPENSATED CIRRHOSIS
*
· *In postmarketing reports, hepatic decompensation and failure, in some cases fatal, have been reported in patients with Primary Biliary Cholangitis (PBC) with decompensated cirrhosis or Child-Pugh Class B or C hepatic impairment when OCALIVA was dosed more frequently than recommended.*
· *The recommended starting dosage of OCALIVA is 5 mg once weekly for patients with Child-Pugh Class B or C hepatic impairment or a prior decompensation event.*
*Contraindications*
OCALIVA is contraindicated in patients with complete biliary obstruction.
*Warnings and Precautions*
*Hepatic Decompensation and Failure in Incorrectly-Dosed PBC Patients with Child-Pugh Class B or C or Decompensated Cirrhosis*
In postmarketing reports, hepatic decompensation and failure, in some cases fatal, have been reported in patients with decompensated cirrhosis or Child-Pugh B or C hepatic impairment when OCALIVA was dosed more frequently than the recommended starting dosage of 5 mg once weekly. Reported cases typically occurred within 2 to 5 weeks after starting OCALIVA and were characterized by an acute increase in total bilirubin and/or ALP concentrations in association with clinical signs and symptoms of hepatic decompensation (e.g., ascites, jaundice, gastrointestinal bleeding, worsening of hepatic encephalopathy).
Routinely monitor patients for progression of PBC disease, including liver-related complications, with laboratory and clinical assessments. Dosage adjustment, interruption or discontinuation may be required. Close monitoring is recommended for patients at an increased risk of hepatic decompensation. Severe intercurrent illnesses that may worsen renal function or cause dehydration (e.g., gastroenteritis), may exacerbate the risk of hepatic decompensation. Interrupt treatment with OCALIVA in patients with laboratory or clinical evidence of worsening liver function indicating risk of decompensation, and monitor the patient’s liver function. Consider discontinuing OCALIVA in patients who have experienced clinically significant liver-related adverse reactions. Discontinue OCALIVA in patients who develop complete biliary obstruction.
*Liver-Related Adverse Reactions*
Dose-related, liver-related adverse reactions including jaundice, worsening ascites and primary biliary cholangitis flare have been observed in clinical trials, as early as one month after starting treatment with OCALIVA 10 mg once daily up to 50 mg once daily (up to 5-times the highest recommended dosage). Monitor patients during treatment with OCALIVA for elevations in liver biochemical tests and for the development of liver-related adverse reactions.
**Severe Pruritus**
Severe pruritus was reported in 23% of patients in the OCALIVA 10 mg arm, 19% of patients in the OCALIVA titration arm, and 7% of patients in the placebo arm in a 12-month double-blind randomized controlled trial of 216 patients. Severe pruritus was defined as intense or widespread itching, interfering with activities of daily living, or causing severe sleep disturbance, or intolerable discomfort, and typically requiring medical interventions. Consider clinical evaluation of patients with new onset or worsening severe pruritus. Management strategies include the addition of bile acid resins or antihistamines, OCALIVA dosage reduction, and/or temporary interruption of OCALIVA dosing.
*Reduction in HDL-C*
Patients with PBC generally exhibit hyperlipidemia characterized by a significant elevation in total cholesterol primarily due to increased levels of high-density lipoprotein-cholesterol (HDL-C). Dose-dependent reductions from baseline in mean HDL-C levels were observed at 2 weeks in OCALIVA-treated patients, 20% and 9% in the 10 mg and titration arms, respectively, compared to 2% in the placebo arm. Monitor patients for changes in serum lipid levels during treatment. For patients who do not respond to OCALIVA after 1 year at the highest recommended dosage that can be tolerated (maximum of 10 mg once daily), and who experience a reduction in HDL-C, weigh the potential risks against the benefits of continuing treatment.
*Adverse Reactions*
The most common adverse reactions from subjects taking OCALIVA were pruritus, fatigue, abdominal pain and discomfort, rash, oropharyngeal pain, dizziness, constipation, arthralgia, thyroid function abnormality, and eczema.
*Drug Interactions*
*Bile Acid Binding Resins*
Bile acid binding resins such as cholestyramine, colestipol, or colesevelam adsorb and reduce bile acid absorption and may reduce the absorption, systemic exposure, and efficacy of OCALIVA. If taking a bile acid binding resin, take OCALIVA at least 4 hours before or 4 hours after taking the bile acid binding resin, or at as great an interval as possible.
*Warfarin*
The International Normalized Ratio (INR) decreased following coadministration of warfarin and OCALIVA. Monitor INR and adjust the dose of warfarin, as needed, to maintain the target INR range when coadministering OCALIVA and warfarin.
*CYP1A2 Substrates with Narrow Therapeutic Index*
Obeticholic acid, the active ingredient in OCALIVA, may increase the exposure to concomitant drugs that are CYP1A2 substrates. Therapeutic monitoring of CYP1A2 substrates with a narrow therapeutic index (e.g. theophylline and tizanidine) is recommended when coadministered with OCALIVA.
*Inhibitors of Bile Salt Efflux Pump*
Avoid concomitant use of inhibitors of the bile salt efflux pump (BSEP) such as cyclosporine. Concomitant medications that inhibit canalicular membrane bile acid transporters such as the BSEP may exacerbate accumulation of conjugated bile salts including taurine conjugate of obeticholic acid in the liver and result in clinical symptoms. If concomitant use is deemed necessary, monitor serum transaminases and bilirubin.
Please see *Full Prescribing Information, including Boxed WARNING* and *Medication Guide* for OCALIVA.
*To report SUSPECTED ADVERSE REACTIONS, contact Intercept Pharmaceuticals, Inc. at 1-844-782-ICPT or FDA at 1-800-FDA-1088 or www.fda.gov/medwatch.*
*Cautionary Note Regarding Forward-Looking Statements
*
This press release contains forward-looking statements, including, but not limited to, statements regarding the progress, timing and results of our clinical trials, including our clinical trials for the treatment of nonalcoholic steatohepatitis (“NASH”), the safety and efficacy of our approved product, Ocaliva (obeticholic acid or “OCA”), the potential approval of OCA for indications other than primary biliary cholangitis (“PBC”), the timing and potential commercial success of OCA and any other product candidates we may develop and our strategy, future operations, future financial position, future revenue, projected costs, financial guidance, prospects, plans, objectives of management and expected market growth.
These statements constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “possible,” “continue” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release, and we undertake no obligation to update any forward-looking statement except as required by law. These forward-looking statements are based on estimates and assumptions by our management that, although believed to be reasonable, are inherently uncertain and subject to a number of risks. The following represent some, but not necessarily all, of the factors that could cause actual results to differ materially from historical results or those anticipated or predicted by our forward-looking statements: our ability to successfully commercialize Ocaliva for PBC; our ability to maintain our regulatory approval of Ocaliva for PBC in the United States, Europe, Canada, Israel, Australia and other jurisdictions in which we have or may receive marketing authorization; the initiation, timing, cost, conduct, progress and results of our research and development activities, preclinical studies and clinical trials, including any issues, delays or failures in identifying patients, enrolling patients, treating patients or completing and timely reporting the results of our NASH or PBC clinical trials; our ability to timely and cost-effectively obtain regulatory approval of our product candidates, including OCA for NASH; conditions that may be imposed by regulatory authorities on our marketing approvals for our products and product candidates, such as the need for clinical outcomes data (and not just results based on achievement of a surrogate endpoint), and any related restrictions, limitations and/or warnings contained in the label of any of our products or product candidates; any potential side effects associated with Ocaliva for PBC, OCA for NASH or our other product candidates that could delay or prevent approval, require that an approved product be taken off the market, require the inclusion of safety warnings or precautions or otherwise limit the sale of such product or product candidate; our ability to maintain our relationships with, and the performance of, third-party vendors upon whom we are substantially dependent, including contract research organizations for our clinical trials and our third-party suppliers and manufacturers; our ability to identify, develop and commercialize our products and product candidates; our ability to obtain and maintain intellectual property protection for our products and product candidates; our ability to successfully commercialize our product candidates, if approved; the size and growth of the markets for our products and product candidates and our ability to serve those markets; the degree of market acceptance of Ocaliva for PBC and, if approved, OCA for NASH or our other product candidates, which may be affected by the ability of patients and healthcare providers to obtain coverage or reimbursement from payors for our products and the extent to which such coverage or reimbursement is provided; our ability to establish and maintain an effective sales and marketing infrastructure directly or through collaborations with third parties; competition from existing drugs or new drugs that become available; our ability to prevent system failures, data breaches or violations of data protection laws; costs and outcomes relating to any disputes, governmental inquiries or investigations, legal proceedings or litigation, including any securities, intellectual property, employment, product liability or other litigation; our collaborators’ election to pursue research, development and commercialization activities; our ability to attract and maintain collaborators with development, regulatory and commercialization expertise; our need for and ability to obtain additional financing; our estimates regarding expenses, revenues and capital requirements and the accuracy thereof; our use of cash and short-term investments; our ability to acquire, license and invest in businesses, technologies, product candidates and products; our ability to attract and retain key personnel to manage our business effectively; our ability to manage the growth of our operations, infrastructure, personnel, systems and controls; our ability to obtain and maintain adequate insurance coverage; and the other risks and uncertainties identified in our periodic filings filed with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2017.
*Contact*
For more information about Intercept, please contact:
Mark Vignola
+1-646-747-1000
investors@interceptpharma.com
Christopher Frates
+1-646-757-2371
media@interceptpharma.com
*Intercept Pharmaceuticals, Inc.*
*Condensed Consolidated Statements of Operations*
(Unaudited)
(In thousands, except per share data)
*Three Months Ended
September 30,* *Nine Months Ended*
* September 30,*
*2018* *2017* *2018* *2017*
Revenue:
Product revenue, net $ 46,581 $ 40,889 $ 124,908 $ 91,933
Licensing revenue 405 445 1,616 1,336
Total revenue 46,986 41,334 126,524 93,269
Operating expenses:
Cost of sales 519 172 1,512 548
Selling, general and administrative 56,812 61,356 184,503 189,363
Research and development 47,941 45,977 144,028 134,001
Total operating expenses 105,272 107,505 330,043 323,912
Operating loss (58,286 ) (66,171 ) (203,519 ) (230,643 )
Other income (expense):
Interest expense (7,671 ) (7,354 ) (22,769 ) (21,840 )
Other income, net 1,503 924 5,051 3,388
(6,168 ) (6,430 ) (17,718 ) (18,452 )
Net loss $ (64,454 ) $ (72,601 ) $ (221,237 ) $ (249,095 )
Net loss per common and potential common share:
Basic and diluted $ (2.18 ) $ (2.89 ) $ (7.89 ) $ (9.96 )
Weighted average common and potential common shares outstanding:
Basic and diluted 29,615 25,104 28,057 25,021
*Condensed Consolidated Balance Sheet Information*
(In thousands)
*September 30, *
* 2018* *December 31,*
* 2017(1)*
*(Unaudited)*
Cash, cash equivalents and investment securities $ 489,093 $ 414,917
Total assets $ 556,953 $ 484,347
Deferred revenue, total $ 2,838 $ 4,454
Total liabilities (2) $ 461,144 $ 467,961
Stockholders’ equity $ 95,809 $ 16,386
_________
(1) Derived from the audited financial statements included in Intercept’s Annual Report on Form 10-K for the year ended December 31, 2017.
(2) Includes $367.2 million and $355.7 million related to the Convertible Notes as of September 30, 2018 and December 31, 2017, respectively. Intercept separately accounts for the debt and equity components of the Convertible Notes. The aggregate outstanding principal amount of the Convertible Notes was $460.0 million as of September 30, 2018 and December 31, 2017.
*Reconciliation of Non-GAAP Adjusted Operating Expenses to Total Operating Expenses*
(Unaudited)
(In thousands)
*Three Months Ended
September 30,* *Nine Months Ended
September 30,*
*2018* *2017* *2018* *2017*
Total operating expenses $ 105,272 $ 107,505 $ 330,043 $ 323,912
Adjustments:
Stock-based compensation 11,994 13,237 38,415 41,584
Depreciation 1,123 1,382 3,551 3,256
Non-GAAP adjusted operating expenses $ 92,155 $ 92,886 $ 288,077 $ 279,072
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Prestige Consumer Healthcare Inc. Reports Fiscal 2019 Second Quarter Results
· Revenue was $239.4 Million in Q2 Fiscal 2019; Organic Revenue Growth of 1.6% Excluding Household Cleaning Divestiture
· GAAP Diluted EPS Increased 4% to $0.59 in Q2; Adjusted EPS Increased 7% to $0.65
· Reduced Debt by $100 Million From Cash Generation and Divestiture Proceeds
· Reaffirming Previously Issued FY’19 Outlook
TARRYTOWN, N.Y., Nov. 01, 2018 (GLOBE NEWSWIRE) -- Prestige Consumer Healthcare Inc. (NYSE:PBH), formerly Prestige Brands Holdings, Inc., today reported financial results for its second quarter and six months ended September 30, 2018.
“We are pleased with second quarter results, driven by continued solid consumption trends across our diversified and leading consumer healthcare portfolio. We reduced our debt by $100 million during the quarter, continuing our prudent capital allocation strategy. Based on our results for the first six months of fiscal 2019 and expectations for the remainder of the year, we are well positioned to achieve our full-year fiscal 2019 guidance,” said Ron Lombardi, Chief Executive Officer of Prestige Consumer Healthcare.
*Second Fiscal Quarter Ended September 30, 2018*
Reported revenues in the second quarter of fiscal 2019 decreased 7.2% to $239.4 million, compared to $258.0 million in the second quarter of fiscal 2018. Revenues increased 1.6% on an organic basis, which excludes the impact related to the divested Household Cleaning segment. Organic revenues for the quarter were driven by continued strong consumption levels across the Company’s core brands, but were partially offset by the previously announced change in accounting policies around revenue recognition and the timing of related expenses as well as the transition of new packaging for the Company’s BC and Goody’s brands.
Reported gross profit margin in the second quarter fiscal 2019 was 57.4%, compared to 55.8% for the second quarter of fiscal 2018 or 56.3% excluding adjustments related to the Fleet acquisition and integration in the prior year. Sequentially, gross margin improved from 55.4% reported in first quarter fiscal 2019. The quarter benefited from increasingly stabilized freight and warehouse costs and the divestiture of the Household Cleaning segment. These improvements were partially offset by the expected BC and Goody’s packaging restage and the change in revenue recognition and the timing of related expenses.
Reported net income for the second quarter of fiscal 2019 totaled $30.8 million versus the prior year comparable quarter’s net income of $30.7 million. Diluted earnings per share were $0.59 for the second quarter of fiscal 2019 compared to $0.57 in the prior year comparable period. Non-GAAP adjusted net income for the second quarter of fiscal 2019 was $34.2 million, an increase over the prior year period’s adjusted net income of $32.5 million. Non-GAAP adjusted earnings per share were $0.65 per share for the second quarter of fiscal 2019 compared to $0.61 per share in the prior year comparable period.
Adjustments to net income in the second quarter of fiscal 2019 and fiscal 2018 include integration, transition, purchase accounting, legal and various other costs associated with acquisitions and divestitures, and the related income tax effects of the adjustments. Adjustments to net income in the second quarter of fiscal 2019 also include accelerated amortization of debt origination costs.
*First Half of Fiscal 2019 Ended September 30, 2018*
Reported revenues for the first six months of fiscal 2019 decreased 4.1% to $493.3 million compared to $514.6 million in the first six months of fiscal 2018. Revenues for the first six months of fiscal 2019 were driven by continued strong consumption levels across the Company’s legacy brands, offset by the divestiture of the non-core Household Cleaning segment in the second quarter of fiscal 2019. Organic revenue increased 0.4% for the first six months as consumption gains were partially offset by changes in accounting policies around revenue recognition and the timing of related expenses, as well as timing the transition of new packaging for the Company’s BC and Goody’s brands.
Reported gross profit margin in the first six months of fiscal 2019 was 56.4%, compared to 55.9% for the first six months of fiscal 2018 or 56.6% excluding adjustments related to the Fleet transition and integration in the prior year. The gross profit margin was in-line with the same period in the previous year as the positive impact of the divestiture of the non-core Household Cleaning segment was partially offset by the change in accounting policies around revenue recognition and the timing of related expenses as well as higher freight and warehousing costs.
Advertising and promotion expense for the first six months of fiscal 2019 was $74.2 million, or 15.0% of sales, compared to $76.1 million, or 14.8% of sales, in the prior year. As expected, higher advertising and promotion expense as a percentage of sales was attributable to ongoing investments behind the Company’s long-term brand building strategy.
Reported net income for the first six months of fiscal 2019 totaled $65.3 million versus the prior year comparable period net income of $64.5 million. Diluted earnings per share were $1.24 for the first six months of fiscal 2019 compared to $1.20 per share in the prior year comparable period. Non-GAAP adjusted net income for the first six months of fiscal 2019 was $70.0 million, an increase over the prior year period’s adjusted net income of $68.0 million. Non-GAAP adjusted earnings per share were $1.33 per share for the first six months of fiscal 2019 compared to $1.27 per share in the first six months of fiscal 2018.
Adjustments to net income in the first six months of fiscal 2019 and fiscal 2018 include integration, transition, purchase accounting, legal and various other costs associated with acquisitions and divestitures, and the related income tax effects of the adjustments. Adjustments to net income in the first six months of fiscal 2019 also include accelerated amortization of debt origination costs.
*Free Cash Flow and Balance Sheet*
The Company's net cash provided by operating activities for the second fiscal quarter of 2019 was $39.3 million compared to $54.4 million during the same period a year earlier. Non-GAAP adjusted free cash flow for the second fiscal quarter of 2019 was $44.1 million, compared to $54.8 million in the prior year comparable quarter. Changes in cash flow were driven by the divestiture of the Household Cleaning segment as well as an increase in inventory related to the launch of new packaging for the Company’s BC and Goody’s brands.
The Company's net debt position as of September 30, 2018 was approximately $1.9 billion. At September 30, 2018 the Company's covenant-defined leverage ratio was approximately 5.2x. The Company reduced debt by $100 million versus the first quarter fiscal 2019 through a combination of cash generation and approximately $50 million from Household Cleaning segment divestiture proceeds.
*Segment Review*
North American OTC Healthcare: Segment revenues totaled $216.0 million for the second quarter of fiscal 2019, compared to the prior year comparable quarter's revenues of $215.3 million. The second quarter fiscal 2019 result was favorably impacted by increased consumption among the majority of core OTC brands, but offset by the impacts of a change in accounting policies surrounding revenue recognition and the launch of new BC and Goody’s packaging.
For the first six months of the current fiscal year, reported revenues for the North American OTC segment were $430.7 million compared to $431.1 million in the prior year comparable period. The first six months of 2019 were favorably impacted by increased consumption among the majority of core OTC brands, but offset by the impacts of a change in accounting policies surrounding revenue recognition and the launch of new BC and Goody’s packaging.
International OTC Healthcare: Segment fiscal second quarter 2019 revenues totaled $23.4 million, an increase of 11.7% versus $21.0 million reported in the prior year comparable period. Higher revenues versus the prior year were driven by consumption growth and the normalization of differences in distributor orders and shipments experienced in first quarter.
For the first six months of the current fiscal year, reported revenues for the International OTC Healthcare segment were $42.8 million, an increase of 2.3% over the prior year comparable period’s revenues of $41.9 million.
Household Cleaning: As previously announced, the Company closed the sale of its Household Cleaning segment on July 2, 2018 and used net proceeds from the divestiture to pay down debt. For the first quarter of fiscal 2019, the Household Cleaning segment generated $19.8 million in revenues with no reported revenue in the second quarter of 2019.
*Commentary and Outlook for Fiscal 2019*
Ron Lombardi, CEO, stated, “Our solid overall second quarter and first half of fiscal 2019 performance are the result of our successful long-term brand-building and portfolio evolution efforts. In our second quarter, we delivered approximately 2% organic growth trends despite the temporary timing factors related to the change in revenue recognition and the BC & Goody’s restaged packaging. In addition, freight and warehouse costs continue to improve to more normalized levels. Meanwhile we used $100 million in the quarter from cash flow and the sale of Household Cleaning towards debt reduction. This debt reduction demonstrates our ongoing commitment to disciplined capital allocation.”
“We are reaffirming our fiscal 2019 outlook for revenue, profitability and cash flow. Our consumer healthcare platform includes a strong and diverse portfolio of brands well positioned for continued long-term growth. We remain focused on the execution of our three-pillar strategy of brand-building, maintaining a strong financial profile, and efficient capital allocation and look forward to continuing to use this approach to drive shareholder value over time,” he concluded.
*Fiscal 2019 Full-Year Outlook*
Revenue $985 to $995 million
Organic Growth Percentage* 0.5% to 1.5%
Adjusted E.P.S.* $2.84 to $2.92
Adjusted Free Cash Flow* $205 million or more
*Fiscal Q2 Conference Call, Accompanying Slide Presentation and Replay*
The Company will host a conference call to review its second quarter results today, November 1, 2018 at 8:30 a.m. ET. The toll-free dial-in numbers are 844-233-9440 within North America and 574-990-1016 outside of North America. The conference ID number is 1375008. The Company provides a live Internet webcast, a slide presentation to accompany the call, as well as an archived replay, all of which can be accessed from the Investor Relations page of the Company's website at www.prestigebrands.com. The slide presentation can be accessed just before the call from the Investor Relations page of the website by clicking on Webcasts and Presentations.
Telephonic replays will be available for two weeks following the completion of the call and can be accessed at 855-859-2056 within North America and at 404-537-3406 from outside North America. The conference ID is 1375008.
*Non-GAAP and Other Financial Information*
In addition to financial results reported in accordance with generally accepted accounting principles (GAAP), we have provided certain non-GAAP financial information in this release to aid investors in understanding the Company's performance. Each non-GAAP financial measure is defined and reconciled to its most closely related GAAP financial measure in the “About Non-GAAP Financial Measures” section at the end of this earnings release.
*Note Regarding Forward-Looking Statements*
This news release contains "forward-looking statements" within the meaning of the federal securities laws that are intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. "Forward-looking statements" generally can be identified by the use of forward-looking terminology such as "assumptions,""target,""guidance,"“strategy,” "outlook,""plans,""projection,""may,""will,""would,""expect,""intend,""estimate,""anticipate,""believe”, "potential," or "continue" (or the negative or other derivatives of each of these terms) or similar terminology. The "forward-looking statements" include, without limitation, statements regarding the Company's expectations regarding future operating results including revenues, earnings per share and free cash flow, the Company's ability to continue to improve freight and warehousing costs, the Company’s ability to increase shareholder value and the Company’s ability to position itself for long-term success and growth. These statements are based on management's estimates and assumptions with respect to future events and financial performance and are believed to be reasonable, though are inherently uncertain and difficult to predict. Actual results could differ materially from those expected as a result of a variety of factors, including the impact of the Company’s advertising and promotional and new product development initiatives, customer inventory management initiatives, general economic and business conditions, fluctuating foreign exchange rates, consumer trends, competitive pressures, and the ability of the Company’s third party manufacturers and logistics providers and suppliers to meet demand for its products and to reduce costs. A discussion of other factors that could cause results to vary is included in the Company's Annual Report on Form 10-K for the year ended March 31, 2018 and other periodic reports filed with the Securities and Exchange Commission.
*About Prestige Consumer Healthcare Inc.*
The Company markets and distributes brand name over-the-counter healthcare products throughout the U.S. and Canada, Australia, and in certain other international markets. The Company’s brands include Monistat® and Summer’s Eve® women's health products, BC® and Goody's® pain relievers, Clear Eyes® eye care products, DenTek® specialty oral care products, Dramamine® motion sickness treatments, Fleet® enemas and glycerin suppositories, Chloraseptic® sore throat treatments, Compound W® wart treatments, Little Remedies® pediatric over-the-counter products, The Doctor's® NightGuard® dental protector, Efferdent® denture care products, Luden's® throat drops, Debrox® earwax remover, Gaviscon® antacid in Canada, and Hydralyte® rehydration products and the Fess® line of nasal and sinus care products in Australia. Visit the Company's website at www.prestigebrands.com.
* See the “About Non-GAAP Financial Measures” section of this report for further presentation information.
* *
*Prestige Consumer Healthcare Inc.*
*Condensed Consolidated Statements of Income and Comprehensive Income*
*(Unaudited)*
*Three Months Ended
September 30,* *Six Months Ended
September 30,*
*(In thousands, except per share data)* *2018* *2017* *2018* *2017*
*Revenues*
Net sales $ 239,354 $ 257,930 $ 493,308 $ 514,417
Other revenues 3 96 29 182
Total revenues 239,357 258,026 493,337 514,599
*Cost of Sales*
Cost of sales excluding depreciation 100,647 112,580 212,716 224,337
Cost of sales depreciation 1,238 1,348 2,526 2,688
Cost of sales 101,885 113,928 215,242 227,025
Gross profit 137,472 144,098 278,095 287,574
*Operating Expenses*
Advertising and promotion 37,042 39,188 74,153 76,132
General and administrative 24,034 21,999 47,975 42,409
Depreciation and amortization 6,756 7,186 13,840 14,353
Gain on divestiture (1,284 ) — (1,284 ) —
Total operating expenses 66,548 68,373 134,684 132,894
Operating income 70,924 75,725 143,411 154,680
*Other (income) expense*
Interest income (33 ) (85 ) (133 ) (154 )
Interest expense 27,103 26,921 53,143 53,331
Other expense (income), net 335 (432 ) 422 (506 )
Total other expense 27,405 26,404 53,432 52,671
Income before income taxes 43,519 49,321 89,979 102,009
Provision for income taxes 12,678 18,616 24,672 37,545
Net income $ 30,841 $ 30,705 $ 65,307 $ 64,464
Earnings per share:
Basic $ 0.59 $ 0.58 $ 1.25 $ 1.21
Diluted $ 0.59 $ 0.57 $ 1.24 $ 1.20
Weighted average shares outstanding:
Basic 51,841 53,098 52,238 53,068
Diluted 52,153 53,539 52,545 53,524
Comprehensive income, net of tax:
Currency translation adjustments (2,145 ) 2,716 (5,119 ) 3,835
Unrecognized net gain on pension plans — — — 1
Total other comprehensive (loss) income (2,145 ) 2,716 (5,119 ) 3,836
Comprehensive income $ 28,696 $ 33,421 $ 60,188 $ 68,300
*Prestige Consumer Healthcare Inc.*
*Condensed Consolidated Balance Sheets*
*(Unaudited)*
*(In thousands)* *September 30,
2018* *March 31,
2018*
*Assets*
Current assets
Cash and cash equivalents $ 36,910 $ 32,548
Accounts receivable, net of allowance of $14,433 and $12,734, respectively 153,849 140,881
Inventories 113,569 118,547
Deferred income tax assets — 26
Prepaid expenses and other current assets 10,172 11,475
Total current assets 314,500 303,477
Property, plant and equipment, net 52,321 52,552
Goodwill 612,444 620,098
Intangible assets, net 2,715,070 2,780,916
Other long-term assets 3,360 3,569
Total Assets $ 3,697,695 $ 3,760,612
*Liabilities and Stockholders' Equity*
Current liabilities
Accounts payable $ 66,251 $ 61,390
Accrued interest payable 9,665 9,708
Other accrued liabilities 70,057 52,101
Total current liabilities 145,973 123,199
Long-term debt, net 1,895,835 1,992,952
Deferred income tax liabilities 440,853 442,518
Other long-term liabilities 21,796 23,333
Total Liabilities 2,504,457 2,582,002
*Stockholders' Equity*
Preferred stock - $0.01 par value
Authorized - 5,000 shares
Issued and outstanding - None — —
Common stock - $0.01 par value
Authorized - 250,000 shares
Issued - 53,609 shares at September 30, 2018 and 53,396 shares at March 31, 2018 536 534
Additional paid-in capital 474,137 468,783
Treasury stock, at cost - 1,871 shares at September 30, 2018 and 353 shares at March 31, 2018 (59,928 ) (7,669 )
Accumulated other comprehensive loss, net of tax (24,434 ) (19,315 )
Retained earnings 802,927 736,277
Total Stockholders' Equity 1,193,238 1,178,610
Total Liabilities and Stockholders' Equity $ 3,697,695 $ 3,760,612
*Prestige Consumer Healthcare Inc.*
*Condensed Consolidated Statements of Cash Flows*
*(Unaudited)*
*Six Months Ended September 30,*
*(In thousands)* *2018* *2017*
*Operating Activities*
Net income $ 65,307 $ 64,464
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 16,366 17,041
Gain on divestiture (1,284 ) —
Loss on disposal of property and equipment 37 1,461
Deferred income taxes 339 16,321
Amortization of debt origination costs 3,021 3,494
Excess tax benefits from share-based awards — 470
Stock-based compensation costs 4,328 4,726
Other 247 —
Changes in operating assets and liabilities:
Accounts receivable (7,718 ) (9,345 )
Inventories (4,145 ) (3,409 )
Prepaid expenses and other current assets 1,302 17,123
Accounts payable 4,187 8,008
Accrued liabilities 14,339 (11,869 )
Other (1,219 ) 55
Net cash provided by operating activities 95,107 108,540
*Investing Activities*
Purchases of property, plant and equipment (5,074 ) (4,785 )
Acquisition of Fleet escrow receipt — 970
Proceeds from divestiture 65,912 —
Net cash provided by (used in) investing activities 60,838 (3,815 )
*Financing Activities*
Term loan repayments (100,000 ) (105,000 )
Borrowings under revolving credit agreement 30,000 —
Repayments under revolving credit agreement (30,000 ) —
Proceeds from exercise of stock options 1,028 1,466
Fair value of shares surrendered as payment of tax withholding (2,281 ) (1,075 )
Repurchase of common stock (49,978 ) —
Net cash used in financing activities (151,231 ) (104,609 )
Effects of exchange rate changes on cash and cash equivalents (352 ) 1,006
Increase in cash and cash equivalents 4,362 1,122
Cash and cash equivalents - beginning of period 32,548 41,855
Cash and cash equivalents - end of period $ 36,910 $ 42,977
Interest paid $ 49,147 $ 49,404
Income taxes paid $ 2,444 $ 9,037
*Prestige Consumer Healthcare Inc.*
*Condensed Consolidated Statements of Income*
*Business Segments*
*(Unaudited)*
*Three Months Ended September 30, 2018*
*(In thousands)* *North American
OTC Healthcare* *International
OTC Healthcare* *Household*
*Cleaning* *Consolidated*
Total segment revenues* $ 215,950 $ 23,407 $ — $ 239,357
Cost of sales 92,007 9,878 — 101,885
Gross profit 123,943 13,529 — 137,472
Advertising and promotion 33,325 3,717 — 37,042
Contribution margin $ 90,618 $ 9,812 $ — 100,430
Other operating expenses 29,506
Operating income 70,924
Other expense 27,405
Income before income taxes 43,519
Provision for income taxes 12,678
Net income $ 30,841
* Intersegment revenues of $1.6 million were eliminated from the North American OTC Healthcare segment.
*Six Months Ended September 30, 2018*
*(In thousands)* *North American
OTC Healthcare* *International
OTC Healthcare* *Household
Cleaning* *Consolidated*
Total segment revenues* $ 430,725 $ 42,801 $ 19,811 $ 493,337
Cost of sales 181,160 17,494 16,588 215,242
Gross profit 249,565 25,307 3,223 278,095
Advertising and promotion 66,583 7,140 430 74,153
Contribution margin $ 182,982 $ 18,167 $ 2,793 203,942
Other operating expenses 60,531
Operating income 143,411
Other expense 53,432
Income before income taxes 89,979
Provision for income taxes 24,672
Net income $ 65,307
* Intersegment revenues of $4.3 million were eliminated from the North American OTC Healthcare segment.
*Three Months Ended September 30, 2017*
*(In thousands)* *North American
OTC Healthcare* *International
OTC Healthcare* *Household
Cleaning* *Consolidated*
Total segment revenues* $ 215,302 $ 20,957 $ 21,767 $ 258,026
Cost of sales 87,184 9,296 17,448 113,928
Gross profit 128,118 11,661 4,319 144,098
Advertising and promotion 35,064 3,593 531 39,188
Contribution margin $ 93,054 $ 8,068 $ 3,788 104,910
Other operating expenses 29,185
Operating income 75,725
Other expense 26,404
Income before income taxes 49,321
Provision for income taxes 18,616
Net income $ 30,705
* Intersegment revenues of $2.3 million were eliminated from the North American OTC Healthcare segment.
*Six Months Ended September 30, 2017*
*(In thousands)* *North American
OTC Healthcare* *International
OTC Healthcare* *Household
Cleaning* *Consolidated*
Total segment revenues* $ 431,117 $ 41,855 $ 41,627 $ 514,599
Cost of sales 173,685 19,246 34,094 227,025
Gross profit 257,432 22,609 7,533 287,574
Advertising and promotion 67,872 7,283 977 76,132
Contribution margin $ 189,560 $ 15,326 $ 6,556 211,442
Other operating expenses 56,762
Operating income 154,680
Other expense 52,671
Income before income taxes 102,009
Provision for income taxes 37,545
Net income $ 64,464
* Intersegment revenues of $3.7 million were eliminated from the North American OTC Healthcare segment.
*About Non-GAAP Financial Measures*In addition to financial results reported in accordance with GAAP, we disclose certain Non-GAAP financial measures ("NGFMs"), including, but not limited to, Non-GAAP Organic Revenues, Non-GAAP Organic Revenue Growth Percentage, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin Percentage, Non-GAAP Adjusted Advertising and Promotion Expense, Non-GAAP Adjusted Advertising and Promotion Expense Percentage, Non-GAAP Adjusted General and Administrative Expense, Non-GAAP Adjusted General and Administrative Expense Percentage, Non-GAAP EBITDA, Non-GAAP EBITDA Margin, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA Margin, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, Non-GAAP Adjusted Free Cash Flow and Net Debt. We use these NGFMs internally, along with GAAP information, in evaluating our operating performance and in making financial and operational decisions. We believe that the presentation of these NGFMs provides investors with greater transparency, and provides a more complete understanding of our business than could be obtained absent these disclosures, because the supplemental data relating to our financial condition and results of operations provides additional ways to view our operation when considered with both our GAAP results and the reconciliations below. In addition, we believe that the presentation of each of these NGFMs is useful to investors for period-to-period comparisons of results in assessing shareholder value, and we use these NGFMs internally to evaluate the performance of our personnel and also to evaluate our operating performance and compare our performance to that of our competitors.
These NGFMs are not in accordance with GAAP, should not be considered as a measure of profitability or liquidity, and may not be directly comparable to similarly titled NGFMs reported by other companies. These NGFMs have limitations and they should not be considered in isolation from or as an alternative to their most closely related GAAP measures reconciled below. Investors should not rely on any single financial measure when evaluating our business. We recommend investors review the GAAP financial measures included in this earnings release. When viewed in conjunction with our GAAP results and the reconciliations below, we believe these NGFMs provide greater transparency and a more complete understanding of factors affecting our business than GAAP measures alone.
*NGFMs Defined*
We define our NGFMs presented herein as follows:
· Non-GAAP Organic Revenues: GAAP Total Revenues excluding revenues associated with divestiture and allocated cost that remain after divestiture in the periods presented.
· Non-GAAP Organic Revenue Growth Percentage: Calculated as the change in Non-GAAP Organic Revenues from prior year divided by prior year Non-GAAP Organic Revenues.
· Non-GAAP Adjusted Gross Margin: GAAP Gross Profit minus certain integration, transition, acquisition and divestiture-related costs.
· Non-GAAP Adjusted Gross Margin Percentage: Calculated as Non-GAAP Adjusted Gross Margin divided by GAAP Total Revenues.
· Non-GAAP Adjusted Advertising and Promotion Expense: GAAP Advertising and Promotion expenses minus certain integration, transition, and acquisition-related costs.
· Non-GAAP Adjusted Advertising and Promotion Expense Percentage: Calculated as Non-GAAP Adjusted Advertising and Promotion expense divided by GAAP Total Revenues.
· Non-GAAP Adjusted General and Administrative Expense: GAAP General and Administrative expenses minus certain integration, transition, acquisition and divestiture-related costs.
· Non-GAAP Adjusted General and Administrative Expense Percentage: Calculated as Non-GAAP Adjusted General and Administrative expense divided by GAAP Total Revenues.
· Non-GAAP EBITDA: GAAP Net Income (Loss) less net interest expense (income), income taxes provision (benefit), and depreciation and amortization.
· Non-GAAP EBITDA Margin: Calculated as Non-GAAP EBITDA divided by GAAP Total Revenues.
· Non-GAAP Adjusted EBITDA: Non-GAAP EBITDA less certain integration, transition, acquisition and divestiture-related costs and gain on divestiture.
· Non-GAAP Adjusted EBITDA Margin: Calculated as Non-GAAP Adjusted EBITDA divided by GAAP Total Revenues.
· Non-GAAP Adjusted Net Income: GAAP Net Income (Loss) before certain integration, transition, acquisition and divestiture-related costs, gain on divestiture, accelerated amortization of debt origination costs, applicable tax impact associated with these items and normalized tax rate adjustment.
· Non-GAAP Adjusted EPS: Calculated as Non-GAAP Adjusted Net Income, divided by the weighted average number of common and potential common shares outstanding during the period.
· Non-GAAP Free Cash Flow: GAAP Net cash provided by operating activities less cash paid for capital expenditures.
· Non-GAAP Adjusted Free Cash Flow: Non-GAAP Free Cash Flow plus cash payments made for integration and transition costs associated with acquisition and divestiture.
· Net Debt: Calculated as total principal amount of debt outstanding ($1,913,000 at September 30, 2018) less cash and cash equivalents ($36,910 at September 30, 2018). Amounts in thousands.
The following tables set forth the reconciliations of each of our NGFMs to their most directly comparable financial measures presented in accordance with GAAP.
*Reconciliation of GAAP Total Revenues to Non-GAAP Organic Revenues and related Non-GAAP Organic Revenue Growth percentage:*
*Three Months Ended
September 30,* *Six Months Ended
September 30,*
*2018**
* *2017* *2018* *2017*
*(In thousands)*
GAAP Total Revenues $ 239,357 $ 258,026 $ 493,337 $ 514,599
Revenue Growth (7.2 )% (4.1 )%
Adjustments:
Revenues associated with divestiture — (21,767 ) (19,811 ) (41,627 )
Allocated costs that remain after divestiture — (700 ) — (1,400 )
Total adjustments — (22,467 ) (19,811 ) (43,027 )
Non-GAAP Organic Revenues $ 239,357 $ 235,559 $ 473,526 $ 471,572
Non-GAAP Organic Revenue Growth 1.6 % 0.4 %
*Reconciliation of GAAP Gross Profit to Non-GAAP Adjusted Gross Margin and related Non-GAAP Adjusted Gross Margin percentage:*
*Three Months Ended
September 30,* *Six Months Ended
September 30,*
*2018* *2017* *2018* *2017*
*(In thousands)*
GAAP Total Revenues $ 239,357 $ 258,026 $ 493,337 $ 514,599
GAAP Gross Profit $ 137,472 $ 144,098 $ 278,095 $ 287,574
GAAP Gross Profit as a Percentage of GAAP Total Revenue 57.4 % 55.8 % 56.4 % 55.9 %
Adjustments:
Integration, transition and other costs associated with divestiture and acquisition ^(1) — 1,143 170 3,719
Total adjustments — 1,143 170 3,719
Non-GAAP Adjusted Gross Margin $ 137,472 $ 145,241 $ 278,265 $ 291,293
Non-GAAP Adjusted Gross Margin as a Percentage of GAAP Total Revenues 57.4 % 56.3 % 56.4 % 56.6 %
^(1) Items related to divestiture and acquisition represent costs related to divesting of assets sold and integrating recently acquired business, including (but not limited to) costs to exit or convert contractual obligations, severance, information system conversion and consulting costs.
*Reconciliation of GAAP Advertising and Promotion Expense and related GAAP Advertising and Promotion Expense percentage to Non-GAAP Adjusted Advertising and Promotion Expense and related Non-GAAP Adjusted Advertising and Promotion Expense percentage:*
*Three Months Ended
September 30,* *Six Months Ended
September 30,*
*2018* *2017* *2018* *2017*
*(In thousands)*
GAAP Advertising and Promotion Expense $ 37,042 $ 39,188 $ 74,153 $ 76,132
GAAP Advertising and Promotion Expense as a Percentage of GAAP Total Revenue 15.5 % 15.2 % 15.0 % 14.8 %
Adjustments:
Integration, transition and other costs associated with acquisition^(1) — (231 ) — (192 )
Total adjustments — (231 ) — (192 )
Non-GAAP Adjusted Advertising and Promotion Expense $ 37,042 $ 39,419 $ 74,153 $ 76,324
Non-GAAP Adjusted Advertising and Promotion Expense as a Percentage of GAAP Total Revenues 15.5 % 15.3 % 15.0 % 14.8 %
^(1) Acquisition related items represent costs related to integrating the advertising agencies of the recently acquired business.
*Reconciliation of GAAP General and Administrative Expense and related GAAP General and Administrative Expense percentage to Non-GAAP Adjusted General and Administrative Expense and related Non-GAAP Adjusted General and Administrative Expense percentage:*
*Three Months Ended
September 30,* *Six Months Ended
September 30,*
*2018* *2017* *2018* *2017*
*(In thousands)*
GAAP General and Administrative Expense^(1) $ 24,034 $ 21,999 $ 47,975 $ 42,409
GAAP General and Administrative Expense as a Percentage of GAAP Total Revenue 10.0 % 8.5 % 9.7 % 8.2 %
Adjustments:
Integration, transition and other costs associated with divestiture and acquisition ^(2) 2,850 888 4,272 1,472
Total adjustments 2,850 888 4,272 1,472
Non-GAAP Adjusted General and Administrative Expense $ 21,184 $ 21,111 $ 43,703 $ 40,937
Non-GAAP Adjusted General and Administrative Expense Percentage as a Percentage of GAAP Total Revenues 8.9 % 8.2 % 8.9 % 8.0 %
^(1) Certain immaterial amounts have been reclassified out of general and administrative expense into other expense for 2017.
^(2) Items related to divestiture and acquisition represent costs related to divesting of assets sold and integrating recently acquired business including (but not limited to), costs to exit or convert contractual obligations, severance, information system conversion and consulting costs; and certain costs related to the consummation of the acquisition and divestiture processes such as insurance costs, legal and other acquisition related professional fees.
*Reconciliation of GAAP Net Income to Non-GAAP EBITDA and related Non-GAAP EBITDA Margin, Non-GAAP Adjusted EBITDA and related Non-GAAP Adjusted EBITDA Margin:*
*Three Months Ended
September 30,* *Six Months Ended
September 30,*
*2018* *2017* *2018* *2017*
*(In thousands)*
GAAP Net Income $ 30,841 $ 30,705 $ 65,307 $ 64,464
Interest expense, net 27,070 26,836 53,010 53,177
Provision for income taxes 12,678 18,616 24,672 37,545
Depreciation and amortization 7,994 8,534 16,366 17,041
Non-GAAP EBITDA 78,583 84,691 159,355 172,227
Non-GAAP EBITDA Margin 32.8 % 32.8 % 32.3 % 33.5 %
Adjustments:
Integration, transition and other costs associated with divestiture and acquisition in Cost of Goods Sold ^(1) — 1,143 170 3,719
Integration, transition and other costs associated with acquisition in Advertising and Promotion Expense^(1) — (231 ) — (192 )
Integration, transition and other costs associated with divestiture and acquisition in General and Administrative Expense ^(1) 2,850 888 4,272 1,472
Gain on divestiture (1,284 ) — (1,284 ) —
Total adjustments 1,566 1,800 3,158 4,999
Non-GAAP Adjusted EBITDA $ 80,149 $ 86,491 $ 162,513 $ 177,226
Non-GAAP Adjusted EBITDA Margin 33.5 % 33.5 % 32.9 % 34.4 %
^(1) Items related to divestiture and acquisition represent costs related to divesting of assets sold and integrating recently acquired business including (but not limited to), costs to exit or convert contractual obligations, severance, information system conversion and consulting costs; and certain costs related to the consummation of the acquisition and divestiture processes such as insurance costs, legal and other acquisition related professional fees.
*Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income and related Non-GAAP Adjusted Earnings Per Share:*
*Three Months Ended
September 30,* *Six Months Ended
September 30,*
*2018* *2018
Adjusted EPS* *2017* *2017
Adjusted EPS* *2018* *2018
Adjusted EPS* *2017* *2017
Adjusted EPS*
*(In thousands, except per share data)*
GAAP Net Income $ 30,841 $ 0.59 $ 30,705 $ 0.57 $ 65,307 $ 1.24 $ 64,464 $ 1.20
Adjustments:
Integration, transition and other costs associated with divestiture and acquisition in Cost of Goods Sold ^(1) — — 1,143 0.02 170 — 3,719 0.07
Integration, transition and other costs associated with acquisition in Advertising and Promotion Expense^(1) — — (231 ) — — — (192 ) —
Integration, transition and other costs associated with divestiture and acquisition in General and Administrative Expense ^(1) 2,850 0.05 888 0.02 4,272 0.08 1,472 0.03
Gain on divestiture (1,284 ) (0.02 ) — — (1,284 ) (0.02 ) — —
Accelerated amortization of debt origination costs 706 0.01 — — 706 0.01 — —
Tax impact of adjustments ^(2) 824 0.02 (658 ) (0.01 ) 420 0.01 (1,825 ) (0.03 )
Normalized tax rate adjustment ^(3) 222 — 614 0.01 415 0.01 312 —
Total adjustments 3,318 0.06 1,756 0.04 4,699 0.09 3,486 0.07
Non-GAAP Adjusted Net Income and Adjusted EPS $ 34,159 $ 0.65 $ 32,461 $ 0.61 $ 70,006 $ 1.33 $ 67,950 $ 1.27
^(1) Items related to divestiture and acquisition represent costs related to divesting of assets sold and integrating recently acquired business including (but not limited to), costs to exit or convert contractual obligations, severance, information system conversion and consulting costs; and certain costs related to the consummation of the acquisition and divestiture processes such as insurance costs, legal and other acquisition related professional fees.
^(2) The income tax adjustments are determined using applicable rates in the taxing jurisdictions in which the above adjustments relate and includes both current and deferred income tax expense (benefit) based on the specific nature of the specific Non-GAAP performance measure.
^(3) Income tax adjustment to adjust for discrete income tax items.
*Reconciliation of GAAP Net Income to Non-GAAP Free Cash Flow and Non-GAAP Adjusted Free Cash Flow:*
*Three Months Ended
September 30,* *Six Months Ended
September 30,*
*2018* *2017* *2018* *2017*
*(In thousands)*
GAAP Net Income $ 30,841 $ 30,705 $ 65,307 $ 64,464
Adjustments:
Adjustments to reconcile net income to net cash provided by operating activities as shown in the Statement of Cash Flows 5,349 21,530 23,054 43,513
Changes in operating assets and liabilities as shown in the Statement of Cash Flows 3,065 2,184 6,746 563
Total adjustments 8,414 23,714 29,800 44,076
GAAP Net cash provided by operating activities 39,255 54,419 95,107 108,540
Purchases of property and equipment (2,605 ) (2,231 ) (5,074 ) (4,785 )
Non-GAAP Free Cash Flow 36,650 52,188 90,033 103,755
Integration, transition and other payments associated with divestiture and acquisition ^(1) 7,429 2,654 7,618 7,602
Non-GAAP Adjusted Free Cash Flow $ 44,079 $ 54,842 $ 97,651 $ 111,357
^(1) Payments related to divestiture and acquisition represent costs related to divesting of assets sold and integrating recently acquired business including (but not limited to), costs to exit or convert contractual obligations, severance, information system conversion and consulting costs; and certain costs related to the consummation of the acquisition and divestiture processes such as insurance costs, legal and other acquisition related professional fees.
*Outlook for Fiscal Year 2019:**Reconciliation of Projected GAAP EPS to Projected Non-GAAP Adjusted EPS:*
*2019 Projected EPS*
*Low* *High*
Projected FY'19 GAAP EPS $ 2.75 $ 2.83
Adjustments:
Sale of Household Cleaning business ^(1) 0.07 0.07
Tax adjustment 0.02 0.02
Total Adjustments 0.09 0.09
Projected Non-GAAP Adjusted EPS $ 2.84 $ 2.92
^(1) Represents costs related to the sale of our Household Cleaning business including (but not limited to) costs to exit or convert contractual obligations, severance, consulting costs and certain costs related to the consummation of the divestiture process such as legal and other divestiture related professional fees, net of taxes, partly offset by the gain on sale of our Household Cleaning business.
*Reconciliation of Projected GAAP Net cash provided by operating activities to Projected Non-GAAP Adjusted Free Cash Flow*
*2019
Projected
Free Cash
Flow*
*(In millions)*
Projected FY'19 GAAP Net cash provided by operating activities $ 195
Additions to property and equipment for cash (13 )
Projected Non-GAAP Free Cash Flow 182
Payments associated with divestiture^(1) 23
Projected Non-GAAP Adjusted Free Cash Flow $ 205
^(1) Divestiture related items represent costs related to divesting of business sold including (but not limited to) taxes, costs to exit or convert contractual obligations, severance, consulting costs and certain costs related to the consummation of the divestiture process such as legal and other divestiture related professional fees.
Prestige Brands Holdings, Inc.
Phil Terpolilli, 914-524-6819
irinquiries@prestigebrands.com Reported by GlobeNewswire 2 hours ago.
· GAAP Diluted EPS Increased 4% to $0.59 in Q2; Adjusted EPS Increased 7% to $0.65
· Reduced Debt by $100 Million From Cash Generation and Divestiture Proceeds
· Reaffirming Previously Issued FY’19 Outlook
TARRYTOWN, N.Y., Nov. 01, 2018 (GLOBE NEWSWIRE) -- Prestige Consumer Healthcare Inc. (NYSE:PBH), formerly Prestige Brands Holdings, Inc., today reported financial results for its second quarter and six months ended September 30, 2018.
“We are pleased with second quarter results, driven by continued solid consumption trends across our diversified and leading consumer healthcare portfolio. We reduced our debt by $100 million during the quarter, continuing our prudent capital allocation strategy. Based on our results for the first six months of fiscal 2019 and expectations for the remainder of the year, we are well positioned to achieve our full-year fiscal 2019 guidance,” said Ron Lombardi, Chief Executive Officer of Prestige Consumer Healthcare.
*Second Fiscal Quarter Ended September 30, 2018*
Reported revenues in the second quarter of fiscal 2019 decreased 7.2% to $239.4 million, compared to $258.0 million in the second quarter of fiscal 2018. Revenues increased 1.6% on an organic basis, which excludes the impact related to the divested Household Cleaning segment. Organic revenues for the quarter were driven by continued strong consumption levels across the Company’s core brands, but were partially offset by the previously announced change in accounting policies around revenue recognition and the timing of related expenses as well as the transition of new packaging for the Company’s BC and Goody’s brands.
Reported gross profit margin in the second quarter fiscal 2019 was 57.4%, compared to 55.8% for the second quarter of fiscal 2018 or 56.3% excluding adjustments related to the Fleet acquisition and integration in the prior year. Sequentially, gross margin improved from 55.4% reported in first quarter fiscal 2019. The quarter benefited from increasingly stabilized freight and warehouse costs and the divestiture of the Household Cleaning segment. These improvements were partially offset by the expected BC and Goody’s packaging restage and the change in revenue recognition and the timing of related expenses.
Reported net income for the second quarter of fiscal 2019 totaled $30.8 million versus the prior year comparable quarter’s net income of $30.7 million. Diluted earnings per share were $0.59 for the second quarter of fiscal 2019 compared to $0.57 in the prior year comparable period. Non-GAAP adjusted net income for the second quarter of fiscal 2019 was $34.2 million, an increase over the prior year period’s adjusted net income of $32.5 million. Non-GAAP adjusted earnings per share were $0.65 per share for the second quarter of fiscal 2019 compared to $0.61 per share in the prior year comparable period.
Adjustments to net income in the second quarter of fiscal 2019 and fiscal 2018 include integration, transition, purchase accounting, legal and various other costs associated with acquisitions and divestitures, and the related income tax effects of the adjustments. Adjustments to net income in the second quarter of fiscal 2019 also include accelerated amortization of debt origination costs.
*First Half of Fiscal 2019 Ended September 30, 2018*
Reported revenues for the first six months of fiscal 2019 decreased 4.1% to $493.3 million compared to $514.6 million in the first six months of fiscal 2018. Revenues for the first six months of fiscal 2019 were driven by continued strong consumption levels across the Company’s legacy brands, offset by the divestiture of the non-core Household Cleaning segment in the second quarter of fiscal 2019. Organic revenue increased 0.4% for the first six months as consumption gains were partially offset by changes in accounting policies around revenue recognition and the timing of related expenses, as well as timing the transition of new packaging for the Company’s BC and Goody’s brands.
Reported gross profit margin in the first six months of fiscal 2019 was 56.4%, compared to 55.9% for the first six months of fiscal 2018 or 56.6% excluding adjustments related to the Fleet transition and integration in the prior year. The gross profit margin was in-line with the same period in the previous year as the positive impact of the divestiture of the non-core Household Cleaning segment was partially offset by the change in accounting policies around revenue recognition and the timing of related expenses as well as higher freight and warehousing costs.
Advertising and promotion expense for the first six months of fiscal 2019 was $74.2 million, or 15.0% of sales, compared to $76.1 million, or 14.8% of sales, in the prior year. As expected, higher advertising and promotion expense as a percentage of sales was attributable to ongoing investments behind the Company’s long-term brand building strategy.
Reported net income for the first six months of fiscal 2019 totaled $65.3 million versus the prior year comparable period net income of $64.5 million. Diluted earnings per share were $1.24 for the first six months of fiscal 2019 compared to $1.20 per share in the prior year comparable period. Non-GAAP adjusted net income for the first six months of fiscal 2019 was $70.0 million, an increase over the prior year period’s adjusted net income of $68.0 million. Non-GAAP adjusted earnings per share were $1.33 per share for the first six months of fiscal 2019 compared to $1.27 per share in the first six months of fiscal 2018.
Adjustments to net income in the first six months of fiscal 2019 and fiscal 2018 include integration, transition, purchase accounting, legal and various other costs associated with acquisitions and divestitures, and the related income tax effects of the adjustments. Adjustments to net income in the first six months of fiscal 2019 also include accelerated amortization of debt origination costs.
*Free Cash Flow and Balance Sheet*
The Company's net cash provided by operating activities for the second fiscal quarter of 2019 was $39.3 million compared to $54.4 million during the same period a year earlier. Non-GAAP adjusted free cash flow for the second fiscal quarter of 2019 was $44.1 million, compared to $54.8 million in the prior year comparable quarter. Changes in cash flow were driven by the divestiture of the Household Cleaning segment as well as an increase in inventory related to the launch of new packaging for the Company’s BC and Goody’s brands.
The Company's net debt position as of September 30, 2018 was approximately $1.9 billion. At September 30, 2018 the Company's covenant-defined leverage ratio was approximately 5.2x. The Company reduced debt by $100 million versus the first quarter fiscal 2019 through a combination of cash generation and approximately $50 million from Household Cleaning segment divestiture proceeds.
*Segment Review*
North American OTC Healthcare: Segment revenues totaled $216.0 million for the second quarter of fiscal 2019, compared to the prior year comparable quarter's revenues of $215.3 million. The second quarter fiscal 2019 result was favorably impacted by increased consumption among the majority of core OTC brands, but offset by the impacts of a change in accounting policies surrounding revenue recognition and the launch of new BC and Goody’s packaging.
For the first six months of the current fiscal year, reported revenues for the North American OTC segment were $430.7 million compared to $431.1 million in the prior year comparable period. The first six months of 2019 were favorably impacted by increased consumption among the majority of core OTC brands, but offset by the impacts of a change in accounting policies surrounding revenue recognition and the launch of new BC and Goody’s packaging.
International OTC Healthcare: Segment fiscal second quarter 2019 revenues totaled $23.4 million, an increase of 11.7% versus $21.0 million reported in the prior year comparable period. Higher revenues versus the prior year were driven by consumption growth and the normalization of differences in distributor orders and shipments experienced in first quarter.
For the first six months of the current fiscal year, reported revenues for the International OTC Healthcare segment were $42.8 million, an increase of 2.3% over the prior year comparable period’s revenues of $41.9 million.
Household Cleaning: As previously announced, the Company closed the sale of its Household Cleaning segment on July 2, 2018 and used net proceeds from the divestiture to pay down debt. For the first quarter of fiscal 2019, the Household Cleaning segment generated $19.8 million in revenues with no reported revenue in the second quarter of 2019.
*Commentary and Outlook for Fiscal 2019*
Ron Lombardi, CEO, stated, “Our solid overall second quarter and first half of fiscal 2019 performance are the result of our successful long-term brand-building and portfolio evolution efforts. In our second quarter, we delivered approximately 2% organic growth trends despite the temporary timing factors related to the change in revenue recognition and the BC & Goody’s restaged packaging. In addition, freight and warehouse costs continue to improve to more normalized levels. Meanwhile we used $100 million in the quarter from cash flow and the sale of Household Cleaning towards debt reduction. This debt reduction demonstrates our ongoing commitment to disciplined capital allocation.”
“We are reaffirming our fiscal 2019 outlook for revenue, profitability and cash flow. Our consumer healthcare platform includes a strong and diverse portfolio of brands well positioned for continued long-term growth. We remain focused on the execution of our three-pillar strategy of brand-building, maintaining a strong financial profile, and efficient capital allocation and look forward to continuing to use this approach to drive shareholder value over time,” he concluded.
*Fiscal 2019 Full-Year Outlook*
Revenue $985 to $995 million
Organic Growth Percentage* 0.5% to 1.5%
Adjusted E.P.S.* $2.84 to $2.92
Adjusted Free Cash Flow* $205 million or more
*Fiscal Q2 Conference Call, Accompanying Slide Presentation and Replay*
The Company will host a conference call to review its second quarter results today, November 1, 2018 at 8:30 a.m. ET. The toll-free dial-in numbers are 844-233-9440 within North America and 574-990-1016 outside of North America. The conference ID number is 1375008. The Company provides a live Internet webcast, a slide presentation to accompany the call, as well as an archived replay, all of which can be accessed from the Investor Relations page of the Company's website at www.prestigebrands.com. The slide presentation can be accessed just before the call from the Investor Relations page of the website by clicking on Webcasts and Presentations.
Telephonic replays will be available for two weeks following the completion of the call and can be accessed at 855-859-2056 within North America and at 404-537-3406 from outside North America. The conference ID is 1375008.
*Non-GAAP and Other Financial Information*
In addition to financial results reported in accordance with generally accepted accounting principles (GAAP), we have provided certain non-GAAP financial information in this release to aid investors in understanding the Company's performance. Each non-GAAP financial measure is defined and reconciled to its most closely related GAAP financial measure in the “About Non-GAAP Financial Measures” section at the end of this earnings release.
*Note Regarding Forward-Looking Statements*
This news release contains "forward-looking statements" within the meaning of the federal securities laws that are intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. "Forward-looking statements" generally can be identified by the use of forward-looking terminology such as "assumptions,""target,""guidance,"“strategy,” "outlook,""plans,""projection,""may,""will,""would,""expect,""intend,""estimate,""anticipate,""believe”, "potential," or "continue" (or the negative or other derivatives of each of these terms) or similar terminology. The "forward-looking statements" include, without limitation, statements regarding the Company's expectations regarding future operating results including revenues, earnings per share and free cash flow, the Company's ability to continue to improve freight and warehousing costs, the Company’s ability to increase shareholder value and the Company’s ability to position itself for long-term success and growth. These statements are based on management's estimates and assumptions with respect to future events and financial performance and are believed to be reasonable, though are inherently uncertain and difficult to predict. Actual results could differ materially from those expected as a result of a variety of factors, including the impact of the Company’s advertising and promotional and new product development initiatives, customer inventory management initiatives, general economic and business conditions, fluctuating foreign exchange rates, consumer trends, competitive pressures, and the ability of the Company’s third party manufacturers and logistics providers and suppliers to meet demand for its products and to reduce costs. A discussion of other factors that could cause results to vary is included in the Company's Annual Report on Form 10-K for the year ended March 31, 2018 and other periodic reports filed with the Securities and Exchange Commission.
*About Prestige Consumer Healthcare Inc.*
The Company markets and distributes brand name over-the-counter healthcare products throughout the U.S. and Canada, Australia, and in certain other international markets. The Company’s brands include Monistat® and Summer’s Eve® women's health products, BC® and Goody's® pain relievers, Clear Eyes® eye care products, DenTek® specialty oral care products, Dramamine® motion sickness treatments, Fleet® enemas and glycerin suppositories, Chloraseptic® sore throat treatments, Compound W® wart treatments, Little Remedies® pediatric over-the-counter products, The Doctor's® NightGuard® dental protector, Efferdent® denture care products, Luden's® throat drops, Debrox® earwax remover, Gaviscon® antacid in Canada, and Hydralyte® rehydration products and the Fess® line of nasal and sinus care products in Australia. Visit the Company's website at www.prestigebrands.com.
* See the “About Non-GAAP Financial Measures” section of this report for further presentation information.
* *
*Prestige Consumer Healthcare Inc.*
*Condensed Consolidated Statements of Income and Comprehensive Income*
*(Unaudited)*
*Three Months Ended
September 30,* *Six Months Ended
September 30,*
*(In thousands, except per share data)* *2018* *2017* *2018* *2017*
*Revenues*
Net sales $ 239,354 $ 257,930 $ 493,308 $ 514,417
Other revenues 3 96 29 182
Total revenues 239,357 258,026 493,337 514,599
*Cost of Sales*
Cost of sales excluding depreciation 100,647 112,580 212,716 224,337
Cost of sales depreciation 1,238 1,348 2,526 2,688
Cost of sales 101,885 113,928 215,242 227,025
Gross profit 137,472 144,098 278,095 287,574
*Operating Expenses*
Advertising and promotion 37,042 39,188 74,153 76,132
General and administrative 24,034 21,999 47,975 42,409
Depreciation and amortization 6,756 7,186 13,840 14,353
Gain on divestiture (1,284 ) — (1,284 ) —
Total operating expenses 66,548 68,373 134,684 132,894
Operating income 70,924 75,725 143,411 154,680
*Other (income) expense*
Interest income (33 ) (85 ) (133 ) (154 )
Interest expense 27,103 26,921 53,143 53,331
Other expense (income), net 335 (432 ) 422 (506 )
Total other expense 27,405 26,404 53,432 52,671
Income before income taxes 43,519 49,321 89,979 102,009
Provision for income taxes 12,678 18,616 24,672 37,545
Net income $ 30,841 $ 30,705 $ 65,307 $ 64,464
Earnings per share:
Basic $ 0.59 $ 0.58 $ 1.25 $ 1.21
Diluted $ 0.59 $ 0.57 $ 1.24 $ 1.20
Weighted average shares outstanding:
Basic 51,841 53,098 52,238 53,068
Diluted 52,153 53,539 52,545 53,524
Comprehensive income, net of tax:
Currency translation adjustments (2,145 ) 2,716 (5,119 ) 3,835
Unrecognized net gain on pension plans — — — 1
Total other comprehensive (loss) income (2,145 ) 2,716 (5,119 ) 3,836
Comprehensive income $ 28,696 $ 33,421 $ 60,188 $ 68,300
*Prestige Consumer Healthcare Inc.*
*Condensed Consolidated Balance Sheets*
*(Unaudited)*
*(In thousands)* *September 30,
2018* *March 31,
2018*
*Assets*
Current assets
Cash and cash equivalents $ 36,910 $ 32,548
Accounts receivable, net of allowance of $14,433 and $12,734, respectively 153,849 140,881
Inventories 113,569 118,547
Deferred income tax assets — 26
Prepaid expenses and other current assets 10,172 11,475
Total current assets 314,500 303,477
Property, plant and equipment, net 52,321 52,552
Goodwill 612,444 620,098
Intangible assets, net 2,715,070 2,780,916
Other long-term assets 3,360 3,569
Total Assets $ 3,697,695 $ 3,760,612
*Liabilities and Stockholders' Equity*
Current liabilities
Accounts payable $ 66,251 $ 61,390
Accrued interest payable 9,665 9,708
Other accrued liabilities 70,057 52,101
Total current liabilities 145,973 123,199
Long-term debt, net 1,895,835 1,992,952
Deferred income tax liabilities 440,853 442,518
Other long-term liabilities 21,796 23,333
Total Liabilities 2,504,457 2,582,002
*Stockholders' Equity*
Preferred stock - $0.01 par value
Authorized - 5,000 shares
Issued and outstanding - None — —
Common stock - $0.01 par value
Authorized - 250,000 shares
Issued - 53,609 shares at September 30, 2018 and 53,396 shares at March 31, 2018 536 534
Additional paid-in capital 474,137 468,783
Treasury stock, at cost - 1,871 shares at September 30, 2018 and 353 shares at March 31, 2018 (59,928 ) (7,669 )
Accumulated other comprehensive loss, net of tax (24,434 ) (19,315 )
Retained earnings 802,927 736,277
Total Stockholders' Equity 1,193,238 1,178,610
Total Liabilities and Stockholders' Equity $ 3,697,695 $ 3,760,612
*Prestige Consumer Healthcare Inc.*
*Condensed Consolidated Statements of Cash Flows*
*(Unaudited)*
*Six Months Ended September 30,*
*(In thousands)* *2018* *2017*
*Operating Activities*
Net income $ 65,307 $ 64,464
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 16,366 17,041
Gain on divestiture (1,284 ) —
Loss on disposal of property and equipment 37 1,461
Deferred income taxes 339 16,321
Amortization of debt origination costs 3,021 3,494
Excess tax benefits from share-based awards — 470
Stock-based compensation costs 4,328 4,726
Other 247 —
Changes in operating assets and liabilities:
Accounts receivable (7,718 ) (9,345 )
Inventories (4,145 ) (3,409 )
Prepaid expenses and other current assets 1,302 17,123
Accounts payable 4,187 8,008
Accrued liabilities 14,339 (11,869 )
Other (1,219 ) 55
Net cash provided by operating activities 95,107 108,540
*Investing Activities*
Purchases of property, plant and equipment (5,074 ) (4,785 )
Acquisition of Fleet escrow receipt — 970
Proceeds from divestiture 65,912 —
Net cash provided by (used in) investing activities 60,838 (3,815 )
*Financing Activities*
Term loan repayments (100,000 ) (105,000 )
Borrowings under revolving credit agreement 30,000 —
Repayments under revolving credit agreement (30,000 ) —
Proceeds from exercise of stock options 1,028 1,466
Fair value of shares surrendered as payment of tax withholding (2,281 ) (1,075 )
Repurchase of common stock (49,978 ) —
Net cash used in financing activities (151,231 ) (104,609 )
Effects of exchange rate changes on cash and cash equivalents (352 ) 1,006
Increase in cash and cash equivalents 4,362 1,122
Cash and cash equivalents - beginning of period 32,548 41,855
Cash and cash equivalents - end of period $ 36,910 $ 42,977
Interest paid $ 49,147 $ 49,404
Income taxes paid $ 2,444 $ 9,037
*Prestige Consumer Healthcare Inc.*
*Condensed Consolidated Statements of Income*
*Business Segments*
*(Unaudited)*
*Three Months Ended September 30, 2018*
*(In thousands)* *North American
OTC Healthcare* *International
OTC Healthcare* *Household*
*Cleaning* *Consolidated*
Total segment revenues* $ 215,950 $ 23,407 $ — $ 239,357
Cost of sales 92,007 9,878 — 101,885
Gross profit 123,943 13,529 — 137,472
Advertising and promotion 33,325 3,717 — 37,042
Contribution margin $ 90,618 $ 9,812 $ — 100,430
Other operating expenses 29,506
Operating income 70,924
Other expense 27,405
Income before income taxes 43,519
Provision for income taxes 12,678
Net income $ 30,841
* Intersegment revenues of $1.6 million were eliminated from the North American OTC Healthcare segment.
*Six Months Ended September 30, 2018*
*(In thousands)* *North American
OTC Healthcare* *International
OTC Healthcare* *Household
Cleaning* *Consolidated*
Total segment revenues* $ 430,725 $ 42,801 $ 19,811 $ 493,337
Cost of sales 181,160 17,494 16,588 215,242
Gross profit 249,565 25,307 3,223 278,095
Advertising and promotion 66,583 7,140 430 74,153
Contribution margin $ 182,982 $ 18,167 $ 2,793 203,942
Other operating expenses 60,531
Operating income 143,411
Other expense 53,432
Income before income taxes 89,979
Provision for income taxes 24,672
Net income $ 65,307
* Intersegment revenues of $4.3 million were eliminated from the North American OTC Healthcare segment.
*Three Months Ended September 30, 2017*
*(In thousands)* *North American
OTC Healthcare* *International
OTC Healthcare* *Household
Cleaning* *Consolidated*
Total segment revenues* $ 215,302 $ 20,957 $ 21,767 $ 258,026
Cost of sales 87,184 9,296 17,448 113,928
Gross profit 128,118 11,661 4,319 144,098
Advertising and promotion 35,064 3,593 531 39,188
Contribution margin $ 93,054 $ 8,068 $ 3,788 104,910
Other operating expenses 29,185
Operating income 75,725
Other expense 26,404
Income before income taxes 49,321
Provision for income taxes 18,616
Net income $ 30,705
* Intersegment revenues of $2.3 million were eliminated from the North American OTC Healthcare segment.
*Six Months Ended September 30, 2017*
*(In thousands)* *North American
OTC Healthcare* *International
OTC Healthcare* *Household
Cleaning* *Consolidated*
Total segment revenues* $ 431,117 $ 41,855 $ 41,627 $ 514,599
Cost of sales 173,685 19,246 34,094 227,025
Gross profit 257,432 22,609 7,533 287,574
Advertising and promotion 67,872 7,283 977 76,132
Contribution margin $ 189,560 $ 15,326 $ 6,556 211,442
Other operating expenses 56,762
Operating income 154,680
Other expense 52,671
Income before income taxes 102,009
Provision for income taxes 37,545
Net income $ 64,464
* Intersegment revenues of $3.7 million were eliminated from the North American OTC Healthcare segment.
*About Non-GAAP Financial Measures*In addition to financial results reported in accordance with GAAP, we disclose certain Non-GAAP financial measures ("NGFMs"), including, but not limited to, Non-GAAP Organic Revenues, Non-GAAP Organic Revenue Growth Percentage, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin Percentage, Non-GAAP Adjusted Advertising and Promotion Expense, Non-GAAP Adjusted Advertising and Promotion Expense Percentage, Non-GAAP Adjusted General and Administrative Expense, Non-GAAP Adjusted General and Administrative Expense Percentage, Non-GAAP EBITDA, Non-GAAP EBITDA Margin, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA Margin, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, Non-GAAP Adjusted Free Cash Flow and Net Debt. We use these NGFMs internally, along with GAAP information, in evaluating our operating performance and in making financial and operational decisions. We believe that the presentation of these NGFMs provides investors with greater transparency, and provides a more complete understanding of our business than could be obtained absent these disclosures, because the supplemental data relating to our financial condition and results of operations provides additional ways to view our operation when considered with both our GAAP results and the reconciliations below. In addition, we believe that the presentation of each of these NGFMs is useful to investors for period-to-period comparisons of results in assessing shareholder value, and we use these NGFMs internally to evaluate the performance of our personnel and also to evaluate our operating performance and compare our performance to that of our competitors.
These NGFMs are not in accordance with GAAP, should not be considered as a measure of profitability or liquidity, and may not be directly comparable to similarly titled NGFMs reported by other companies. These NGFMs have limitations and they should not be considered in isolation from or as an alternative to their most closely related GAAP measures reconciled below. Investors should not rely on any single financial measure when evaluating our business. We recommend investors review the GAAP financial measures included in this earnings release. When viewed in conjunction with our GAAP results and the reconciliations below, we believe these NGFMs provide greater transparency and a more complete understanding of factors affecting our business than GAAP measures alone.
*NGFMs Defined*
We define our NGFMs presented herein as follows:
· Non-GAAP Organic Revenues: GAAP Total Revenues excluding revenues associated with divestiture and allocated cost that remain after divestiture in the periods presented.
· Non-GAAP Organic Revenue Growth Percentage: Calculated as the change in Non-GAAP Organic Revenues from prior year divided by prior year Non-GAAP Organic Revenues.
· Non-GAAP Adjusted Gross Margin: GAAP Gross Profit minus certain integration, transition, acquisition and divestiture-related costs.
· Non-GAAP Adjusted Gross Margin Percentage: Calculated as Non-GAAP Adjusted Gross Margin divided by GAAP Total Revenues.
· Non-GAAP Adjusted Advertising and Promotion Expense: GAAP Advertising and Promotion expenses minus certain integration, transition, and acquisition-related costs.
· Non-GAAP Adjusted Advertising and Promotion Expense Percentage: Calculated as Non-GAAP Adjusted Advertising and Promotion expense divided by GAAP Total Revenues.
· Non-GAAP Adjusted General and Administrative Expense: GAAP General and Administrative expenses minus certain integration, transition, acquisition and divestiture-related costs.
· Non-GAAP Adjusted General and Administrative Expense Percentage: Calculated as Non-GAAP Adjusted General and Administrative expense divided by GAAP Total Revenues.
· Non-GAAP EBITDA: GAAP Net Income (Loss) less net interest expense (income), income taxes provision (benefit), and depreciation and amortization.
· Non-GAAP EBITDA Margin: Calculated as Non-GAAP EBITDA divided by GAAP Total Revenues.
· Non-GAAP Adjusted EBITDA: Non-GAAP EBITDA less certain integration, transition, acquisition and divestiture-related costs and gain on divestiture.
· Non-GAAP Adjusted EBITDA Margin: Calculated as Non-GAAP Adjusted EBITDA divided by GAAP Total Revenues.
· Non-GAAP Adjusted Net Income: GAAP Net Income (Loss) before certain integration, transition, acquisition and divestiture-related costs, gain on divestiture, accelerated amortization of debt origination costs, applicable tax impact associated with these items and normalized tax rate adjustment.
· Non-GAAP Adjusted EPS: Calculated as Non-GAAP Adjusted Net Income, divided by the weighted average number of common and potential common shares outstanding during the period.
· Non-GAAP Free Cash Flow: GAAP Net cash provided by operating activities less cash paid for capital expenditures.
· Non-GAAP Adjusted Free Cash Flow: Non-GAAP Free Cash Flow plus cash payments made for integration and transition costs associated with acquisition and divestiture.
· Net Debt: Calculated as total principal amount of debt outstanding ($1,913,000 at September 30, 2018) less cash and cash equivalents ($36,910 at September 30, 2018). Amounts in thousands.
The following tables set forth the reconciliations of each of our NGFMs to their most directly comparable financial measures presented in accordance with GAAP.
*Reconciliation of GAAP Total Revenues to Non-GAAP Organic Revenues and related Non-GAAP Organic Revenue Growth percentage:*
*Three Months Ended
September 30,* *Six Months Ended
September 30,*
*2018**
* *2017* *2018* *2017*
*(In thousands)*
GAAP Total Revenues $ 239,357 $ 258,026 $ 493,337 $ 514,599
Revenue Growth (7.2 )% (4.1 )%
Adjustments:
Revenues associated with divestiture — (21,767 ) (19,811 ) (41,627 )
Allocated costs that remain after divestiture — (700 ) — (1,400 )
Total adjustments — (22,467 ) (19,811 ) (43,027 )
Non-GAAP Organic Revenues $ 239,357 $ 235,559 $ 473,526 $ 471,572
Non-GAAP Organic Revenue Growth 1.6 % 0.4 %
*Reconciliation of GAAP Gross Profit to Non-GAAP Adjusted Gross Margin and related Non-GAAP Adjusted Gross Margin percentage:*
*Three Months Ended
September 30,* *Six Months Ended
September 30,*
*2018* *2017* *2018* *2017*
*(In thousands)*
GAAP Total Revenues $ 239,357 $ 258,026 $ 493,337 $ 514,599
GAAP Gross Profit $ 137,472 $ 144,098 $ 278,095 $ 287,574
GAAP Gross Profit as a Percentage of GAAP Total Revenue 57.4 % 55.8 % 56.4 % 55.9 %
Adjustments:
Integration, transition and other costs associated with divestiture and acquisition ^(1) — 1,143 170 3,719
Total adjustments — 1,143 170 3,719
Non-GAAP Adjusted Gross Margin $ 137,472 $ 145,241 $ 278,265 $ 291,293
Non-GAAP Adjusted Gross Margin as a Percentage of GAAP Total Revenues 57.4 % 56.3 % 56.4 % 56.6 %
^(1) Items related to divestiture and acquisition represent costs related to divesting of assets sold and integrating recently acquired business, including (but not limited to) costs to exit or convert contractual obligations, severance, information system conversion and consulting costs.
*Reconciliation of GAAP Advertising and Promotion Expense and related GAAP Advertising and Promotion Expense percentage to Non-GAAP Adjusted Advertising and Promotion Expense and related Non-GAAP Adjusted Advertising and Promotion Expense percentage:*
*Three Months Ended
September 30,* *Six Months Ended
September 30,*
*2018* *2017* *2018* *2017*
*(In thousands)*
GAAP Advertising and Promotion Expense $ 37,042 $ 39,188 $ 74,153 $ 76,132
GAAP Advertising and Promotion Expense as a Percentage of GAAP Total Revenue 15.5 % 15.2 % 15.0 % 14.8 %
Adjustments:
Integration, transition and other costs associated with acquisition^(1) — (231 ) — (192 )
Total adjustments — (231 ) — (192 )
Non-GAAP Adjusted Advertising and Promotion Expense $ 37,042 $ 39,419 $ 74,153 $ 76,324
Non-GAAP Adjusted Advertising and Promotion Expense as a Percentage of GAAP Total Revenues 15.5 % 15.3 % 15.0 % 14.8 %
^(1) Acquisition related items represent costs related to integrating the advertising agencies of the recently acquired business.
*Reconciliation of GAAP General and Administrative Expense and related GAAP General and Administrative Expense percentage to Non-GAAP Adjusted General and Administrative Expense and related Non-GAAP Adjusted General and Administrative Expense percentage:*
*Three Months Ended
September 30,* *Six Months Ended
September 30,*
*2018* *2017* *2018* *2017*
*(In thousands)*
GAAP General and Administrative Expense^(1) $ 24,034 $ 21,999 $ 47,975 $ 42,409
GAAP General and Administrative Expense as a Percentage of GAAP Total Revenue 10.0 % 8.5 % 9.7 % 8.2 %
Adjustments:
Integration, transition and other costs associated with divestiture and acquisition ^(2) 2,850 888 4,272 1,472
Total adjustments 2,850 888 4,272 1,472
Non-GAAP Adjusted General and Administrative Expense $ 21,184 $ 21,111 $ 43,703 $ 40,937
Non-GAAP Adjusted General and Administrative Expense Percentage as a Percentage of GAAP Total Revenues 8.9 % 8.2 % 8.9 % 8.0 %
^(1) Certain immaterial amounts have been reclassified out of general and administrative expense into other expense for 2017.
^(2) Items related to divestiture and acquisition represent costs related to divesting of assets sold and integrating recently acquired business including (but not limited to), costs to exit or convert contractual obligations, severance, information system conversion and consulting costs; and certain costs related to the consummation of the acquisition and divestiture processes such as insurance costs, legal and other acquisition related professional fees.
*Reconciliation of GAAP Net Income to Non-GAAP EBITDA and related Non-GAAP EBITDA Margin, Non-GAAP Adjusted EBITDA and related Non-GAAP Adjusted EBITDA Margin:*
*Three Months Ended
September 30,* *Six Months Ended
September 30,*
*2018* *2017* *2018* *2017*
*(In thousands)*
GAAP Net Income $ 30,841 $ 30,705 $ 65,307 $ 64,464
Interest expense, net 27,070 26,836 53,010 53,177
Provision for income taxes 12,678 18,616 24,672 37,545
Depreciation and amortization 7,994 8,534 16,366 17,041
Non-GAAP EBITDA 78,583 84,691 159,355 172,227
Non-GAAP EBITDA Margin 32.8 % 32.8 % 32.3 % 33.5 %
Adjustments:
Integration, transition and other costs associated with divestiture and acquisition in Cost of Goods Sold ^(1) — 1,143 170 3,719
Integration, transition and other costs associated with acquisition in Advertising and Promotion Expense^(1) — (231 ) — (192 )
Integration, transition and other costs associated with divestiture and acquisition in General and Administrative Expense ^(1) 2,850 888 4,272 1,472
Gain on divestiture (1,284 ) — (1,284 ) —
Total adjustments 1,566 1,800 3,158 4,999
Non-GAAP Adjusted EBITDA $ 80,149 $ 86,491 $ 162,513 $ 177,226
Non-GAAP Adjusted EBITDA Margin 33.5 % 33.5 % 32.9 % 34.4 %
^(1) Items related to divestiture and acquisition represent costs related to divesting of assets sold and integrating recently acquired business including (but not limited to), costs to exit or convert contractual obligations, severance, information system conversion and consulting costs; and certain costs related to the consummation of the acquisition and divestiture processes such as insurance costs, legal and other acquisition related professional fees.
*Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income and related Non-GAAP Adjusted Earnings Per Share:*
*Three Months Ended
September 30,* *Six Months Ended
September 30,*
*2018* *2018
Adjusted EPS* *2017* *2017
Adjusted EPS* *2018* *2018
Adjusted EPS* *2017* *2017
Adjusted EPS*
*(In thousands, except per share data)*
GAAP Net Income $ 30,841 $ 0.59 $ 30,705 $ 0.57 $ 65,307 $ 1.24 $ 64,464 $ 1.20
Adjustments:
Integration, transition and other costs associated with divestiture and acquisition in Cost of Goods Sold ^(1) — — 1,143 0.02 170 — 3,719 0.07
Integration, transition and other costs associated with acquisition in Advertising and Promotion Expense^(1) — — (231 ) — — — (192 ) —
Integration, transition and other costs associated with divestiture and acquisition in General and Administrative Expense ^(1) 2,850 0.05 888 0.02 4,272 0.08 1,472 0.03
Gain on divestiture (1,284 ) (0.02 ) — — (1,284 ) (0.02 ) — —
Accelerated amortization of debt origination costs 706 0.01 — — 706 0.01 — —
Tax impact of adjustments ^(2) 824 0.02 (658 ) (0.01 ) 420 0.01 (1,825 ) (0.03 )
Normalized tax rate adjustment ^(3) 222 — 614 0.01 415 0.01 312 —
Total adjustments 3,318 0.06 1,756 0.04 4,699 0.09 3,486 0.07
Non-GAAP Adjusted Net Income and Adjusted EPS $ 34,159 $ 0.65 $ 32,461 $ 0.61 $ 70,006 $ 1.33 $ 67,950 $ 1.27
^(1) Items related to divestiture and acquisition represent costs related to divesting of assets sold and integrating recently acquired business including (but not limited to), costs to exit or convert contractual obligations, severance, information system conversion and consulting costs; and certain costs related to the consummation of the acquisition and divestiture processes such as insurance costs, legal and other acquisition related professional fees.
^(2) The income tax adjustments are determined using applicable rates in the taxing jurisdictions in which the above adjustments relate and includes both current and deferred income tax expense (benefit) based on the specific nature of the specific Non-GAAP performance measure.
^(3) Income tax adjustment to adjust for discrete income tax items.
*Reconciliation of GAAP Net Income to Non-GAAP Free Cash Flow and Non-GAAP Adjusted Free Cash Flow:*
*Three Months Ended
September 30,* *Six Months Ended
September 30,*
*2018* *2017* *2018* *2017*
*(In thousands)*
GAAP Net Income $ 30,841 $ 30,705 $ 65,307 $ 64,464
Adjustments:
Adjustments to reconcile net income to net cash provided by operating activities as shown in the Statement of Cash Flows 5,349 21,530 23,054 43,513
Changes in operating assets and liabilities as shown in the Statement of Cash Flows 3,065 2,184 6,746 563
Total adjustments 8,414 23,714 29,800 44,076
GAAP Net cash provided by operating activities 39,255 54,419 95,107 108,540
Purchases of property and equipment (2,605 ) (2,231 ) (5,074 ) (4,785 )
Non-GAAP Free Cash Flow 36,650 52,188 90,033 103,755
Integration, transition and other payments associated with divestiture and acquisition ^(1) 7,429 2,654 7,618 7,602
Non-GAAP Adjusted Free Cash Flow $ 44,079 $ 54,842 $ 97,651 $ 111,357
^(1) Payments related to divestiture and acquisition represent costs related to divesting of assets sold and integrating recently acquired business including (but not limited to), costs to exit or convert contractual obligations, severance, information system conversion and consulting costs; and certain costs related to the consummation of the acquisition and divestiture processes such as insurance costs, legal and other acquisition related professional fees.
*Outlook for Fiscal Year 2019:**Reconciliation of Projected GAAP EPS to Projected Non-GAAP Adjusted EPS:*
*2019 Projected EPS*
*Low* *High*
Projected FY'19 GAAP EPS $ 2.75 $ 2.83
Adjustments:
Sale of Household Cleaning business ^(1) 0.07 0.07
Tax adjustment 0.02 0.02
Total Adjustments 0.09 0.09
Projected Non-GAAP Adjusted EPS $ 2.84 $ 2.92
^(1) Represents costs related to the sale of our Household Cleaning business including (but not limited to) costs to exit or convert contractual obligations, severance, consulting costs and certain costs related to the consummation of the divestiture process such as legal and other divestiture related professional fees, net of taxes, partly offset by the gain on sale of our Household Cleaning business.
*Reconciliation of Projected GAAP Net cash provided by operating activities to Projected Non-GAAP Adjusted Free Cash Flow*
*2019
Projected
Free Cash
Flow*
*(In millions)*
Projected FY'19 GAAP Net cash provided by operating activities $ 195
Additions to property and equipment for cash (13 )
Projected Non-GAAP Free Cash Flow 182
Payments associated with divestiture^(1) 23
Projected Non-GAAP Adjusted Free Cash Flow $ 205
^(1) Divestiture related items represent costs related to divesting of business sold including (but not limited to) taxes, costs to exit or convert contractual obligations, severance, consulting costs and certain costs related to the consummation of the divestiture process such as legal and other divestiture related professional fees.
Prestige Brands Holdings, Inc.
Phil Terpolilli, 914-524-6819
irinquiries@prestigebrands.com Reported by GlobeNewswire 2 hours ago.
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Here is why Tendulkar thinks India have a huge opportunity in Australia
With Australia not having their two key players Steve Smith and David Warner, batting great Sachin Tendulkar believes that it will be a "huge opportunity" for India to do something special Down Under.
Reported by DNA 2 hours ago.
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Tommy Robinson announces plans for speaking tour of Australia
Robinson, originally from Luton, is planning trips to speak in the U.S. and Australia, which some have estimated could see him rake in hundreds of thousands of pounds to fund his activism.
Reported by MailOnline 2 hours ago.
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Meghan Markle coat: The real reason the Duchess of Sussex’s coat was so oversized explained as it’s revealed Prince Harry lent her his
Prince Harry and Meghan Markle enjoyed a stroll on their last day on the royal tour [Getty] Prince Harry and Meghan Markle ended their royal tour of Australia, Fiji, Tonga and New Zealand on 31 October. The Duke and Duchess of Sussex enjoyed a stroll around the Redwoods Tree Walk to mark the end of their travels, with both Meghan and Harry dressing casual for the occasion. Prince William’s brother wore a pair of chinos teamed with a black shirt and ...
Reported by OK! 50 minutes ago.
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HelloFresh is European champion for excellent production standards
*World market leader wins "Industrial Excellence Award Europe 2018"*
*Berlin, 01 November 2018* - HelloFresh, the global market leader in the meal-kit sector, has won the prestigious European “Industrial Excellence Award”. Just recently, the company was awarded the "Industrial Excellence Award" for Germany. The Award honors HelloFresh for setting extraordinary standards within the supply chain and for production standards.
"Our complex supply chain enables us to deliver more than 16 million high quality meals to customers in three continents every month. It is one of our key competitive advantages to meet the highest quality standards in the food industry. The award shows that we are living up to our claim of international leadership and have managed to build up something unique in such a short time ", says Markus Windisch, HelloFresh COO.
HelloFresh convinced the jury with the rapid development and expansion of the complex and extremely robust supply chain, with which the company is revolutionizing the market for "fresh food at home" worldwide. In addition, HelloFresh managed to put 16 large distribution centers worldwide into operation, in only seven years. A special challenge is the handling of perishable food as well as the close and direct involvement of producers.HelloFresh competed against the national winners from other Western European countries, as well as Turkey.
*Press contact*
Saskia Leisewitz
Corporate Communications
HelloFresh SE
+49 (0) 174 7235961
sl@hellofresh.com
www.hellofreshgroup.com
*About HelloFresh*
HelloFresh is the world’s leading meal kit company and operates in the U.S., the United Kingdom, Germany, the Netherlands, Belgium, Luxembourg, Australia, Austria, Switzerland, Canada and New Zealand. HelloFresh delivered 48.9 million meals to 1.84 million active customers worldwide in the three-month period between April 1, 2018 and June 30, 2018. HelloFresh was founded in Berlin in November 2011 and went public on the Frankfurt Stock Exchange in November 2017. HelloFresh has offices in New York, Berlin, London, Amsterdam, Zurich, Sydney, Toronto and Auckland. Reported by EQS Group 1 hour ago.
*Berlin, 01 November 2018* - HelloFresh, the global market leader in the meal-kit sector, has won the prestigious European “Industrial Excellence Award”. Just recently, the company was awarded the "Industrial Excellence Award" for Germany. The Award honors HelloFresh for setting extraordinary standards within the supply chain and for production standards.
"Our complex supply chain enables us to deliver more than 16 million high quality meals to customers in three continents every month. It is one of our key competitive advantages to meet the highest quality standards in the food industry. The award shows that we are living up to our claim of international leadership and have managed to build up something unique in such a short time ", says Markus Windisch, HelloFresh COO.
HelloFresh convinced the jury with the rapid development and expansion of the complex and extremely robust supply chain, with which the company is revolutionizing the market for "fresh food at home" worldwide. In addition, HelloFresh managed to put 16 large distribution centers worldwide into operation, in only seven years. A special challenge is the handling of perishable food as well as the close and direct involvement of producers.HelloFresh competed against the national winners from other Western European countries, as well as Turkey.
*Press contact*
Saskia Leisewitz
Corporate Communications
HelloFresh SE
+49 (0) 174 7235961
sl@hellofresh.com
www.hellofreshgroup.com
*About HelloFresh*
HelloFresh is the world’s leading meal kit company and operates in the U.S., the United Kingdom, Germany, the Netherlands, Belgium, Luxembourg, Australia, Austria, Switzerland, Canada and New Zealand. HelloFresh delivered 48.9 million meals to 1.84 million active customers worldwide in the three-month period between April 1, 2018 and June 30, 2018. HelloFresh was founded in Berlin in November 2011 and went public on the Frankfurt Stock Exchange in November 2017. HelloFresh has offices in New York, Berlin, London, Amsterdam, Zurich, Sydney, Toronto and Auckland. Reported by EQS Group 1 hour ago.
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Ongoing Australian quarantine saga claims first victim with top sprinter Trapeze Artist to miss HKIR
Authorities are in a race against time to broker an eleventh-hour deal which would allow Australian horses to compete in the Longines Hong Kong International Races but the ongoing quarantine saga has already claimed its first victim. Top sprinter Trapeze Artist is the first horse to officially withdraw because of the long-running dispute, with trainer Gerald Ryan confirming he has pulled the pin on a Hong Kong Sprint (1,200m) assault, instead opting for the spelling paddock in Australia....
Reported by S.China Morning Post 1 hour ago.
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